A supplier loan usually represents a short-term debt financing and is mainly used in the field of trading. The loan is thus classified in the category of trade credits. The supplier grants his customer a payment target and receives compensation for this delay. These payment periods are industry-specific and vary between 30 and 90 days. The loan amount for a supplier credit always corresponds exactly to the value of the goods to be delivered to the customer.
Interest and fees for the supplier credit
Suppliers usually specify a discount percentage. If the customer can settle his debt directly, he also receives a discount on his purchase. Usually between 1 and 3 percent of the value of goods. This may then be deducted by the customer independently. If the cash discount is not claimed, the amount of the invoice will bear interest. This can also be compared with dunning fees, although this is not a payment reminder or a reminder, but a kind of default interest without direct default.
What collateral do creditors and suppliers have?
Creditors usually deliver with a reservation of title. If the customer does not pay, he has a right to the goods. Suppliers are also entitled to obtain information about the customer. On the basis of data stocks or information about the economic conditions, suppliers can themselves form an opinion and weigh up risks. Accordingly, the supplier credit is not possible for every entrepreneur. In these cases, companies, mostly limited liability companies, have to pay in advance.
A further safeguard is the credit default insurance, which can be taken out by the customer. The creditor can then be paid out with the help of the insurance company, the creditworthiness of the customer is then checked by the insurance. The supplier would also be on the safe side here.
Is there a fixed interest rate on the supplier credit?
No. However, the interest rate is still fixed in its amount at the beginning of the contract. The borrower can only influence the amount of the payment if he pays ahead of schedule and uses the cash discount.
Advantages and disadvantages of other types of financing
Supplier loans can be arranged without a bank, they go quickly, easily and informally. However, such loans can also be correspondingly expensive, despite cash discount. Nevertheless, interest rates are often enormously high when compared to a standard loan. However, the unused discount amount can be deducted from the tax as an operating expense. Thus, the financing costs can be fully taken into account in the tax.
Supplier credits are concluded directly with the supplier, which must be noted on the invoice.