Net 30 and 60 days are quickly becoming a thing of the past with an increasing number of vendors. The hard economic times that we face make it difficult for vendors to extend the lengthy credit terms that they once used to. Shortened credit terms have had a huge impact on the cash flow of small businesses. They are forced to demand upfront payment also for the products and services they provide or risk going out of business. Their inability to extend longer credit terms to their customers can inhibit business growth especially if they are unable to compete with other providers who are in a position to do so.
An Insight into Trade Terms
A new or cash-strapped business can improve their cash flow by getting trade credit from their suppliers. It helps them build business credit in addition to improving cash flow. When trade credit is established with a vendor the business is able to buy products now and pay later.
The payment terms can range from net 30 (most common) or net 60 where they have 30 or 60 days from the invoice date to pay for the goods purchased. Another popular payment term on trade credit accounts is the 2% 10 days. This simply means that if the business pays within 10 days of the invoice date a 2% rebate in the invoice is issued. Everybody wins with this since the vendors get paid early and the small business owner saves some money. Of course if your business is not cash strapped then the 2% 10 is the best way to go otherwise the net 30 or 60, if available, will give you the time you need to accumulate the funds to pay your vendors.
How Business Trade Credit Cards Fit In
Business trade cards like the Plum card offered by American Express allow business owners to purchase goods and services from vendors under trade terms even if the vendor does not provide it. Since more and more vendors are now requiring upfront payment for their goods a trade credit card effectively puts the trade terms into the hands of the business owners who carry the card.
The card gives business owners all the features of trade terms without the hassle of haggling with vendors for more time to pay.
Benefits of a Trade Credit Card
No Preset Spending Limit. Since the card is essentially a business credit card the few cards of this type on the market do not have a preset spending limit.
Attractive Rebates. Just like the 2% 10 trade credit term a trade credit card will give 1-1.5% rebates for early payment, 10 days, on your entire balance.
Longer No Interest Periods. For the businesses that are short on cash flow the longer no interest periods are a welcome relief. All that is required is a 10% payment on the balance and the rest can be deferred interest free for up to 60 days.
Purchase Protection. The trade card is essentially a credit card with trade terms so you still get all the great benefits of a credit card like protection for your purchases. For instance the card offered by American Express cover purchases with extended warranty and dispute resolution. You can feel safe with fraud protection guarantee and save money with automatic Open Savings where you get discounts at select partners.
Travel Insurance and Savings. Insurance on rental cars that covers car rental loss and damages in the case of an accident. Roadside assistance, travel accidents and emergency help is also available. Travel discounts also extend to car rentals, airlines and hotels.
Dedicated Account Management. Enjoy the luxury of having your account managed by customer service representatives that work around the clock. Easily have your account managed when you need an emergency card replacement, account alerts, payment reminders and account statements that you can categorize anyway you want. Like other business credit cards it makes accounting a lot easier.
If you need access to the trade terms and are having difficulties getting it from your vendors then a trade credit card is the way to go.