How should I negotiate payment terms with suppliers?

It is important that you build credibility and trust with the supplier. Therefore, we do not advise asking for the most favorable terms immediately.

Best practices indicate to allow for the completion of a handful of production runs and to demonstrate timely payments. If you are able to provide a forecast against your future runs, it will show the supplier that you are likely to stay for a period of time. US suppliers tend to be more generous with payment terms than those overseas but keep in mind that their regulations are also different. Some of these US suppliers you see are brokers and they do extend very favorable terms but in doing so they are adding a premium.

During your conversations in asking for more favorable terms, don't be alarmed if the supplier performs a credit check or asks for your financial statements. Showing a healthy balance sheet will go a long way in securing the net terms you are after. Also, going piecemeal is important. If there is a deposit, ask to waive the deposit and place it on shipment departure prior to asking for everything to be net 30. Just like you, the supplier is also running their own business.

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