Trade Terms

Trade Terms define the payment and credit conditions agreed upon between a business and its suppliers. They determine when invoices are due, how long a business can hold stock before payment, and impact cashflow management. Trade Terms are essential when using finance products such as Invoice Finance, Business Line of Credit, or Working Capital Loans.

Why Trade Terms Matter

Properly negotiated Trade Terms help businesses maintain healthy cashflow and avoid shortfalls. They are crucial for SMEs in the Tradie Hub, Truckie Hub, Café Hub, and Whitecoat Hub, and are a key concept inside the Business Owners Finance Hub.

Aligns supplier payments with revenue inflows
Supports strategic cashflow management and budgeting
Reduces reliance on short-term finance or overdrafts
Improves lender confidence when applying for facilities

Understanding trade terms is key to effectively utilising your Business Cashflow System.

How Trade Terms Work

Agreed between buyer and supplier (e.g., 30, 60, 90 days)
Invoice issued according to agreed terms
Business uses funds from operations or finance facilities to pay supplier
Longer trade terms can enhance cashflow but may affect supplier relations

Trade Terms are considered by lenders when calculating Borrowing Capacity, Credit Limit, and structuring facilities like Invoice Finance.

Related Switchboard Resources

Official guidance: business.gov.au

Can trade terms be negotiated?

Yes — businesses can negotiate payment periods and credit limits with suppliers, especially when they have strong payment history or support from facilities like a Business Line of Credit.

Do trade terms affect finance approvals?

Yes — lenders consider trade terms when calculating borrowing capacity and structuring facilities such as Working Capital Loans and Invoice Finance.

What happens if invoices are paid late?

Late payments may incur fees, strain supplier relationships, and negatively impact your business credit profile. If late payments are frequent, it can be a sign that your cashflow is under pressure and you may need support from facilities such as a Business Line of Credit or Working Capital Loan.