Many suppliers offer a discount if you pay early rather than waiting out the full credit terms. It can be tempting, but if your cash is tight you may not have the funds free to take the offer. This raises a sensible question: is it worth using finance to capture a supplier discount?
It can be a smart trade
If the saving from paying early is worth more than the cost of the short-term finance, the maths can work in your favour. You are effectively swapping a small cost of borrowing for a larger supplier saving, while keeping your own cash free for other needs.
Do the comparison honestly
- Compare the cost of the finance over your agreed term against the discount value.
- Factor in how long you would hold the borrowing before repaying.
- Only count discounts you would actually use, on stock or supplies you genuinely need.
Avoid the trap
The strategy backfires if you borrow to buy more than you need just to chase a discount, or if the finance costs more than you save. Use it deliberately on real, needed purchases. You repay over your agreed term at the rate shown in your offer.
Credicorp lends only to UK limited companies and LLPs for business purposes. We do not lend to individuals or sole traders and take no personal guarantees from directors. As an exempt lender we are outside the FCA consumer-credit regime, so the Financial Ombudsman Service and FSCS do not apply.
See also: Paying suppliers early to secure settlement discounts, Using funding to take a bulk inventory discount and Are there fees for paying off my facility early?.