The supplier credit is a credit granted to the buyer by the supplier as part of his commercial contract. Depending on the countries, industries and special agreements between a supplier and its customer, it may be agreed – in commercial matters – that the supplier is paid after a specified period (30 to 90 days most often in some cases longer).
To the supplier credit can be assimilated that obtained for the settlement of various operating expenses: Taxes, social contributions, etc.
Issues of Supplier Credit
For the customer
The supplier credit reduces the WCR (working capital requirement). The customer therefore has an interest – in principle – in paying his suppliers as late as possible.
That said, the purchase price with the supplier’s credit payment is not as low as possible: Contrary to appearances, supplier credit is not free. The buyer can indeed ask to benefit from a price reduction in case of cash payment : the discount for cash payment (a reduction of tariff of 2 to 3%, which can correspond in annual rate to a value between 10 to 20%).
For the supplier
Amounts: between 1 and 10 million euros Duration: 2 to 5 years. Guarantees: export credit insurance such COFACE .