Is a 2% discount really worth borrowing for?

Do the annualized math: 2% for paying 20 days early is roughly 36% annualized. As long as your line costs materially less than that, capturing the discount is a clear positive. Most operators underestimate this by looking at the 2% in isolation.

How much of the line will I actually use?

Typically you draw around day ten and repay as receivables collect, so the balance revolves rather than sitting fully drawn. Interest accrues only on what is outstanding, which is why the effective cost is far lower than the headline rate suggests.

Can I negotiate better discounts once I can actually pay early?

Frequently, yes. Suppliers value predictable early payment, and distributors who become reliable day-ten payers often negotiate improved terms or better allocation on constrained products. The relationship benefit sometimes exceeds the discount itself.

What if my suppliers do not offer early pay terms?

Ask before assuming. Many suppliers will offer a discount for early payment even when it is not on the published terms sheet, particularly if you are a consistent volume buyer. Bring us the terms you can negotiate and we will size the facility to the actual benefit.

Arbitrage you already earned

Using a Line of Credit to Capture Supplier Discounts

A 2/10 net 30 discount is worth roughly 36% annualized. Almost no business turns down a 36% return when it is framed that way, yet thousands of distributors and manufacturers let those discounts expire every month because cash is not available on day ten. This is the rare use of borrowed money where the arithmetic frequently makes the facility pay for itself.

Quick answer

Use a revolving line of credit to take 2/10 net 30 supplier discounts. The math often more than covers the cost of the facility. $100K to $10M.

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You are probably here because

Your suppliers offer 2/10 net 30 or similar terms that you routinely cannot take

You are paying on day 30 not by choice but because the cash is not there on day 10

Your material costs are a large share of COGS, so discount capture moves gross margin measurably

You want a facility whose cost is offset by a quantifiable, recurring saving

How we structure it

Line size$100K – $10M

InterestCharged only on the drawn balance, typically for 20 days per cycle

CycleDraw to pay on day 10, repay when the customer receivable lands

Time to close2 – 4 weeks

What we need to give you an answer

Have these together and you will know where you stand in 24-48 hours instead of three weeks.

Supplier terms documentation showing the available discounts

Annual purchase volume with those suppliers, which sizes the actual benefit

AR aging and collection cycle, since that determines how long each draw stays out

Trailing financials sufficient to support the facility on its own merits

How it played out

A facility that paid for itself and then some

An industrial distributor purchased $18M annually from suppliers offering 2/10 net 30, capturing maybe a fifth of the available discounts. Full capture was worth roughly $360,000 a year. We closed a $2M revolving line; each cycle the company drew to pay on day ten and repaid as receivables collected, keeping the average outstanding balance near $1.4M for about twenty days a month. Interest cost ran well under the discounts captured, and gross margin improved by more than a point.