If you don’t think supplier credit matters to your business, think again. One of the most flexible and accessible types of business, trade credit is one of the most popular types of short-term financing for U.S. small businesses, according to the FDIC. 

The reality is that net-30 accounts can be one of the most accessible ways to build business credit while managing cash flow, whether your business is new or has been around a while.

Understanding Net-30 Accounts

Net-30 accounts are credit terms with suppliers who give your business 30 days to pay for goods or services after you make your purchase. In other words, you can buy what your business needs now, but pay for it later. Here’s the process:

• You apply for credit with a supplier or vendor.
• They approve your business for a certain credit limit, and payment terms.
• You buy what you need, and pay for it on the agreed upon terms.

We will go into more detail on each of these steps in this article.

These accounts serve two crucial purposes: they help your business get what it needs without paying upfront, help your business manage your cash flow, and may also help your business build business credit.

When a supplier offers net-30 terms, they’re essentially providing a 30-day, interest-free loan. For example, if you order $1,000 in supplies on March 1st with net-30 terms, your payment would be due on March 31st, giving you some time to generate revenue before you need to pay the bill. 

Nav CEO Levi King shares this story from his first year business as a sign manufacturer. He paid upfront every time he needed supplies for this business until one day his supplier said he could just as easily set up a credit account and pay in 30 days.

King writes: “Anyone who’s ever faced a looming financial deadline will know what a godsend an extra 30 days can be. I jumped on my supplier’s offer, continued paying my bills, and eventually stretched that 30-day grace period to three full months.”

How Net-30 Accounts Build Business Credit

Net-30 accounts can be an excellent way to establish business credit, particularly for newer businesses. Accounts like these that report to business credit are called tradelines. 

If your vendors report your payment history to major business credit bureaus like Dun & Bradstreet, Experian Business, Equifax Business, or Creditsafe, and you pay on time, these accounts may help establish a positive payment history.  

On-time payments reported to business credit can strengthen your business credit history over time. 

When you work with multiple vendors who report to credit bureaus, you can create a more robust credit history. In some cases, early payments can positively impact your credit scores beyond regular on-time payments.

Benefits of Net-30 Accounts

Beyond helping your business build credit, net-30 accounts can offer several advantages.

Vendors can be a small business owner’s best creditor and a valuable business partner. They want your business, so as long as you make timely payments, they will help you with the supplies or resources you need to deliver your products and services while improving cash flow. 

From a cash flow perspective, these accounts help you extend your payment timeline and match payment cycles to your revenue patterns. This flexibility allows you to preserve cash reserves and better handle seasonal fluctuations in your business.

Looking at day-to-day operations, net-30 terms may enable you to stock inventory without paying up front. This may also allow your business to take advantage of bulk pricing opportunities. This arrangement helps maintain a consistent supply chain while building stronger vendor relationships that can lead to better terms over time.

Some vendors offer discounts if you pay early (say 2% if you pay in 10 days).

From a credit perspective, net-30 accounts can be attractive for several reasons:

• The credit application process is usually straightforward and simple. It’s often easier to qualify than small business loans with traditional lenders. 
• Good personal credit is not typically required and personal guarantees are not common. 

While you may not get the large credit lines you’d get with a bank loan or even a business line of credit, this type of financing can be very helpful to your overall business financial health. 

Setting Up Net-30 Accounts: Step-by-Step Guide

Before you get your first vendor account, make sure you set up your business properly. The reason you want to do this is to help ensure that when you get credit, the credit bureaus will be able to match the account to your business. 

It’s helpful to set up a legal business entity and get an Employer Identification Number (EIN) from the IRS. Some suppliers will not extend credit to sole proprietorships. And a few may not work with startups until they have at least 3-6 months in business.

Get any necessary business licenses. It helps to get a dedicated business phone number (even if it rings to your cell phone) and a business bank account. 

Read: Nav’s Checklist to Make Your Business Legit

Once these fundamentals are in place, research potential vendors with a focus on those who report to business credit reporting agencies. Consider suppliers specifically relevant to your industry and review their application requirements, payment terms, and credit limits. 

Building vendor relationships starts with working with starter vendors (sometimes referred to as “Tier 1” vendors). These typically have easy approval requirements, and a personal credit check is rarely required. They may offer a low credit limit to start, but paying on time may help your business get access to more credit at better terms.  

You may also have to pay an annual membership fee which helps those businesses weed out companies that may not be serious about paying on time. 

You may need to make a few purchases where you pay up front before you can access credit. Buy things your business already needs so you don’t overspend. 

Then pay on time. This is the most important thing your business can do to establish a good relationship with your vendors, and to begin to build your business credit history. 

Finally, track due dates and set reminders so you don’t pay late. 

Check and monitor your business credit reports to see when these accounts freeport, and what information they report. You can also track the impact of these accounts on your business credit scores.

Who Should Use Net-30 Accounts? 

Here are a few examples of how net-30 accounts can benefit your business: 

Samara owns a three-chair beauty salon and uses net-30 accounts with beauty supply distributors to maintain a professional inventory without straining her cash flow. Her approach allows her to order $2,000 in supplies monthly, sell products she buys to customers, and pay for a significant portion of that inventory from cash flow. 

Robert is building his real estate investment business. Fixing up and maintaining properties requires cash up front. Through net-30 accounts with home improvement suppliers, he gets the supplies he needs to improve a property, then rent or sell it. Along with several business credit cards, he is able to handle unexpected repairs swiftly without depleting his cash reserves. 

Erika has an ecommerce business and seasonal inventory demands are always a challenge. Her online boutique uses net-30 terms strategically with product suppliers to maintain optimal inventory levels during peak seasons. She uses net-30 terms and a line of credit to make sure she’s never out of the inventory her customers want. 

Net-30 Pros and Cons

Common Pitfalls to Avoid

First, make sure you understand net terms. If you’re a new business that hasn’t used net 30 vendors before, you may misinterpret when payments are actually due. For example, it’s easy to confuse invoice dates with delivery dates. The payment due date is tracked from the invoice date, not when you receive goods. 

Also make sure you check whether the payment period refers to calendar days or business days so you don’t accidentally pay late. 

This distinction can mean the difference between on-time payments and paying late. 

You also want to be smart about how and when you use vendor credit. While net-30 terms provide flexibility, relying too heavily on them may mask underlying cash flow issues. Smart businesses maintain a balance between trade credit and cash reserves to  make sure they’re not constantly operating at the edge of their credit limits.

And while vendor credit can be valuable, realize there may be times when your business needs additional credit, or different types of credit. 

While starter vendors play an important role in establishing initial credit, businesses should actively work toward establishing business accounts with industry-specific suppliers who may offer longer payment terms and higher credit limits as their credit profile improves.

Net-30 Payment Terms Example

Here’s a very basic example of what net-30 invoice payment terms might look like when you set up a vendor account. 

Net-30 Payment Terms Example

TERMS OF SALE: Payment is due within 30 days of invoice. A statement will be mailed at the end of each month.  Customer may submit payment via credit card, ACH, or check.  An additional 1.75% per month interest charge (21% annual percentage rate) will be charged on all invoices not paid within 30 days. This rate is based on your past due balance at the end of each billing period. Payments made 30 days after invoice date must include this service charge to be considered fully paid.  If your account is turned over to a collection agency or attorney for collection, or in the event of a default, all costs of collection, including a reasonable attorney’s fee, will be paid by the debtor.  The undersigned assumes full responsibility, and agrees to be liable for bills incurred as a result of this application. Print Name:___________________________________ Title: ________________________________________ Signature:____________________________________ Date:________________________________________

Maximizing Net-30 Accounts

Ready to get the most out of your net-30 accounts? Let’s talk about some smart moves that can really pay off for your business.

First, pay on time or even early. Early payments may get you payment discounts and you’ll also build great relationships with your vendors. In some cases, paying early can boost your credit scores. 

Pro tip: set up automatic payments a few days ahead of the due date. It’s one less thing to worry about, and your vendors will love you for it.

As your business grows, be strategic about picking your providers. Start with the ones who report to credit bureaus, as they can help you in your goal to build stronger business credit. Then, as your credit improves, branch out to suppliers who offer better terms and higher credit limits. Think of it like climbing a ladder; each step gets you better terms and more flexibility.

Keep an eye on how much credit you’re using, too. A good rule of thumb is to stay below 30-50% of your available credit. That buffer helps keep your credit healthy and gives you room to maneuver when opportunities (or emergencies) pop up. 

Keep good records of your purchases and payments, and check your business credit reports regularly. You might be surprised how quickly you qualify for better terms or higher limits.

Remember, smart use of net-30 accounts isn’t just about getting more time to pay – it’s about building a stronger, more flexible business that’s ready for growth.

How Nav Can Help

Here’s how Nav can help you make the most of net 30 accounts to help improve your business finances.

Nav’s complete guide to net-30 accounts will help you find accounts that can help you build business credit, whether your business is brand new or well-established. 

Then, with Nav, you can check, manage, and monitor your business credit. With Nav Credit Health, you can see where you stand for free, or see deeper details with a Nav Prime membership.

FAQs

What do net-30 terms mean? 

Net-30 terms provide a 30-day window to pay for purchases after receiving an invoice. The “net” refers to the fact that full payment is due, and “30” indicates the number of days you have to pay. For example, if you receive an invoice dated January 1st, payment would be due January 31st, regardless of when you received the goods or services, provided the terms refer to calendar days. 

What happens if you don’t pay net-30? 

Missing a payment typically triggers late fees and interest charges, often around 1.5-2% monthly. More seriously, late payments can appear on your business credit reports and may affect your business credit scores. Consistent late payments might result in vendors reducing your credit limit, requiring advance payment, or terminating your account entirely.

What is a net 30 account example? 

A common example is an office supply vendor offering net-30 terms. If you purchase $2,000 in office furniture on March 1st, you would have until March 31st to pay the full amount. Some vendors might offer a 2% discount if you pay within 10 days (known as 2/10 net-30 terms); in this example, that means you’d pay $1,960 if you pay off the account by March 11th.

What does net 30 policy mean? 

A net-30 policy outlines the complete terms of the credit arrangement between a vendor and customer. This includes payment deadlines, late payment penalties, early payment discounts, accepted payment methods, and credit limits. It represents the formal agreement governing how trade credit will be extended and managed between both parties.

Because of their business credit-building potential and ability to stretch cash flow farther, accounts with net-30 terms are a popular type of credit among small business owners and large corporations alike.