Payment Terms Are the Cheapest Financing in the Economy, and Small Suppliers Provide It

When a large buyer takes ninety days to pay an invoice that specified thirty, the transaction is not merely late. It is a loan: the supplier has delivered goods or services and is financing the customer's working capital until payment arrives, at zero interest, without having agreed to it. In aggregate this is one of the largest and least visible credit markets in any economy, and its lenders are systematically the parties with the worst access to actual credit. The pressure on that arrangement rises with interest rates. For the buyer, extending payment terms is the cheapest source of liquidity available — cheaper than a credit line, requiring no covenant and no approval. For the supplier, the same delay must be bridged with borrowing that now costs materially more than it did in the era of near-zero rates, or with invoice financing whose discount comes straight out of the margin. The identical delay in days therefore transfers substantially more value than it used to, which is why the topic has re-emerged as a policy question after years of quiet. Regulatory responses have converged on a small set of instruments: statutory maximum terms for defined transaction types, automatic interest and recovery costs on late payment, and mandatory public reporting of payment performance by large companies. The reporting requirement is arguably the most effective of the three, not because of enforcement but because it makes the practice legible — a buyer's average days-to-pay becomes a fact that suppliers, journalists and procurement counterparties can look up, and reputational cost applies where legal cost is slow. For a small supplier, the durable lesson is that payment terms belong in pricing rather than in hope. Terms are a commercial variable like volume or specification: they can be quoted differently, discounted for early settlement, or reflected in the price offered to a buyer with a known slow record. Treating them as an administrative detail settled after the deal, rather than a financing decision made during it, is how a business ends up profitable on paper and short of cash in the bank — the specific combination that closes otherwise healthy companies.