Net Terms vs. Prepay: Choosing Payment Terms as a Wholesale Buyer

Wholesale payment terms are frequently treated as a simple discount ladder — pay sooner, save more. That framing misses the actual financial trade-off a buyer is making.

Prepay is a cash-for-discount trade, not free money

A prepay discount is real, but it only pencils out if your business isn't paying more to access that cash than the discount is worth — whether that's a revolving credit line, factoring costs, or simply opportunity cost on cash you'd otherwise deploy elsewhere.

Net-30 and net-60 shift risk, not just timing

Extended terms let you sell through inventory before you've paid for it, which materially improves cash conversion cycle — but it also means carrying that liability on your books, and it typically comes at full list price rather than a discounted rate.

Match terms to the category's sell-through speed

A fast-selling core style might justify prepay, since you'll convert to cash quickly regardless. A newer or higher-risk style might be better ordered on longer terms, so the supplier is sharing more of the sell-through risk with you.

Different orders can use different terms

Your default account terms don't have to be your only option — many suppliers, Hector Footwear included, let you select terms per order, with anything outside your account default routed for a quick credit check rather than blocked outright.

Model the real numbers before assuming prepay is "cheaper"

Run the actual math: your cost of capital against the prepay discount percentage, over the actual number of days you'd otherwise hold that cash. For many smaller retailers, net-30 is the better economic choice even with a smaller headline discount on the table.