What Is Net-30?

What Is Net-30?

What Is Net-30?

At the basic level, net-30 refers to the time frame in which the full amount must be paid by a client. With a net-30 invoice, the client has to pay within 30 days or less. Yet that doesn’t really tell you how net-30 might help you to build commercial credit or why it can be a great choice of credit for new and old businesses alike.

Keep reading for a breakdown of exactly what is net-30 and learn how your business might benefit from opening a few of these useful tradelines.

TL;DR: What Is Net-30? 

Net-30 describes the time frame in which an amount must be paid back to the creditor. Financing or terms including net-30 terms may be extended to your business by a vendor or supplier. With net-30 terms, your payment is due 30 days after you receive an invoice for the goods or services your company purchased. 

Trade accounts may feature net-60 or net-90 terms as well. However, net-30 terms tend to be more commonly offered by vendors and suppliers.

If you’re searching for vendor accounts to establish credit for your company, here are links to a few helpful guides from Nav:

Because of their business credit-building potential and ability to stretch cash flow farther, accounts with net-30 terms are a popular type of credit among small business owners and large corporations alike. 

What Are Net-30 Terms?

Net terms determine how long a customer has to pay back a vendor after making a purchase. This is also sometimes called vendor credit or trade credit. Having net-30 terms on a vendor account means the full payment from the customer is due in full 30 days after the invoice date. It’s one of the more common invoice payment terms. These are 30 calendar days rather than business days, although an invoice written after the 20th of the month often waits to start the clock until the first day of the next month.  

Why Is Net-30 Attractive to Small Businesses?

Offering net-30 payment terms to customers can help small businesses that don’t have a lot of cash on hand at any one time make necessary purchases for their business. The customer pays in full by the end of 30 days, but they can also choose to make smaller payments that might be easier. 

Longer payment terms like net-60 or net-90 give even more flexibility for small businesses. Net terms can especially help attract new clients if a business reports on-time payments to business credit bureaus. In this way, similar to some business credit cards, the payments act as a tradeline and can help businesses build their business credit history. 

How Is Net-30 Used in Business?

Businesses use net terms as a form of trade credit and to increase customer loyalty. Many small businesses face cash flow problems from time to time, and having an extended period of time to make a full payment helps with cash flow. The business can wait to pay until they receive a payment from their own accounts receivable rather than having to make the payment immediately upon delivery. 

Invoicing software can help with the complexity of tracking net-30 terms across multiple clients and managing late or overdue payments.

Pros and Cons of Net-30

Let’s go over the advantages and disadvantages of net-30 terms.

Net-30 Interest Rate

While every vendor sets its own terms when offering trade credit, many vendors don’t charge interest on net-30 accounts. But that doesn’t mean net-30 financing is necessarily free. Even if a vendor doesn’t charge you interest, there may still be less obvious costs associated with these short-term vendor accounts.

Trade credit can be a valuable resource for your business. Not only will trade credit help you to stretch your cash flow, it can also help you to establish business credit, even if your company is a startup or new to credit. In fact, the Small Business Administration recommends vendor accounts as one of the top ways for businesses to build credit for the first time.

Here are two common ways a vendor might charge you for extending net-30 terms:

Loss of early payment discount

Your vendor might give you up to 30 days to pay the invoice (net-30 terms) but offer you an incentive (aka a payment discount) if you pay early. This is sometimes referred to as 2/10 net-30 terms (though there are other types of similar credit terms as well). Under 2/10 net-30 terms, you would receive a 2% discount if you pay your invoice within 10 days or less.

If you wait too long and miss out on an early payment discount, you’ll pay more for those goods or services than you would otherwise. For example, it might cost you $1,000 to wait 30 days to pay your invoice or $980 if you pay early. In this scenario, taking advantage of net-30 terms costs you an extra $20. That extra money is a cost you should consider, even if it’s technically not considered to be an interest charge.

Late payment penalties

Some net-30 invoices specify that you’ll be charged penalty interest or fees for late payments. You should be aware of this possibility and carefully read the terms of your agreement. Ideally, you’ll want to avoid late payments, not just because of potential late charges, but also because late payments could potentially damage your business credit reports and scores.  

Net-30 Payment Terms Letter

When a vendor offers you net-30 terms, you’ll most likely be required to sign something called a payment terms letter. This may also be referred to as an agreement or contract, and it may be included as part of your initial application. 

A net-30 payment terms letter will spell out how, when, and under which conditions a vendor expects to get paid when it sells you goods or services. 

A payment terms letter might include any of the following:

  • How long you (the customer) have to pay your invoice
  • Early payment discounts (if available)
  • Late fees or penalty interest
  • List of accepted payment methods

Net-30 Payment Terms Example

Here’s a very basic example of what net-30 invoice payment terms might look like when you set up a vendor account. 

Net-30 Payment Terms Example
TERMS OF SALE: Payment is due within 30 days of invoice. A statement will be mailed at the end of each month. 


Customer may submit payment via credit card, ACH, or check. 

An additional 1.75% per month interest charge (21% annual percentage rate) will be charged on all invoices not paid within 30 days. This rate is based on your past due balance at the end of each billing period. Payments made 30 days after invoice date must include this service charge to be considered fully paid. 

If your account is turned over to a collection agency or attorney for collection, or in the event of a default, all costs of collection, including a reasonable attorney’s fee, will be paid by the debtor. 

The undersigned assumes full responsibility, and agrees to be liable for bills incurred as a result of this application.

Print Name:___________________________________

Title: ________________________________________




How Does Net-30 Compare With Other Payment Terms?

Net payment terms differ mostly in the number of days that a client has to make the full payment. Advance payment terms are another option, and they require full or partial payment ahead of delivery. There are also immediate payment terms that require the client to pay upon delivery or once the service is rendered. 

Net terms are one option for dated payment terms that offer a longer payment period. The other dated payment terms are end of the month (EOM) and month following invoice. Partial payment terms allow the client to sign up for stage payments or a line of credit until the full payment is made. Partial payment terms will usually charge interest for the time that the client has credit, while net-30 terms will often only charge interest on late payments.

Net-30 and Cash Flow

Bookkeeping can be a challenge when you offer net-30 terms because you’ll often have many outstanding accounts. Accounting software can help you manage your cash flow and your accounts payable to make sure you have enough money flowing into the company at all times. 

Net-30 and Creditworthiness

Businesses that offer net-30 terms look at potential new customers’ credit before approving them. A customer with bad credit can turn into bad debt for the business because they may be less likely to make the payment due. That’s why it can be more challenging for a new business to get net-30 terms because they don’t have credit established.

Creditworthiness is also a factor in businesses’ eligibility for small business loans and other financing, so it’s important for many reasons to establish healthy business credit scores.

Net-30 and Late Payments

Businesses that make payments made after the due date usually are charged a late fee and interest, which can add up. Late payments make it challenging for businesses to manage their own cash flow, so it can be a real headache. It’s possible to automate your fees and notices to clients that are late with payments using accounting software so you don’t have to spend hours every month reaching out to late customers.

Before You Apply

Before you apply for trade credit, it’s smart to make sure your business is as prepared as possible. Doing so may increase your chances of approval when you apply for a new vendor account. The following three steps may help.

1. Make sure your business is legitimate

To ensure that your company looks credible to vendors and lenders, you’ll need to set things up the right way upfront.

A few of the steps you may need to take include:

  • Form a legal business entity
  • Register for an EIN with the IRS
  • Open a business bank account
  • Apply for a D-U-N-S number with Dun & Bradstreet 

For more details and advice, check out this full 15-step checklist to help you make your business legit.

2. Check your credit 

It’s important to keep a close eye on your credit reports — both business and personal. However, it’s never more important to know what your credit looks like than when you’re getting ready to apply for financing.

While many vendors are willing to open net-30 for startups and other business credit newbies, some may still want to review your credit reports first. Although it’s less common with net-30, some vendors may also want to check your personal credit report when you apply.

If there’s a chance a vendor or lender is going to be reviewing your credit reports, you should review them yourself first. The last thing you want to experience when you apply for financing is an unpleasant surprise hanging out on your credit report without your knowledge.

Thankfully, accessing your credit is easy. You can check your business and personal credit side by side with Nav.

3. Find vendors that report to credit bureaus

Are you trying to open vendor accounts to build your business credit profile? If so, it’s crucial to find a net-30 that reports to the business credit bureaus. 

Any net-30 vendor account might help you to stretch your company’s cash flow farther.  But, only net-30s that report can potentially help you establish better business credit for the future.  

It may be tempting to skip these steps to try to speed up the business credit-building process. However, laying the groundwork before you apply for a net-30 (or any other type of business credit) is important. If you prepare in advance, you may significantly boost your chances of success. 

If you do qualify for net-30, remember that it’s crucial to always pay on time. Your business credit scores are heavily influenced by your payment history. When you pay late, your scores could take a hit. Pay early, on the other hand, and you might earn a credit score boost.

This article was originally written on January 27, 2020 and updated on May 8, 2023.

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2 responses to “What Is Net-30?

  1. I don’t find appropriate that NAV is suggesting Net 30 Accounts should be obtained to establish business credit.
    Grainger and Quill haven’t reported 1 of my many on time payments. From the emails I’ve received from the credit departments of both vendors, they don’t intend on reporting and are not required to do so. And I’ve charged hundreds of dollars with both and have a zero balance.

    1. It is very difficult to obtain regular and current information from vendors. Unlike personal credit, business credit reports do not have to list the names of companies that report. (And yes, reporting is always voluntary.) Nevertheless, we do our best to try to provide current information from the vendors themselves, and if that is not possible, through individuals who have these accounts reporting on their credit reports.

      Quill recently suspended reporting due to mail delivery issues. An executive there told us they plan to report again in the future, but that they did not want to report customers who make payments by mail as late simply because mail was delivered more slowly than normal. This is the first we’ve heard of that Grainger isn’t reporting and we will investigate to determine whether that is an across the board policy or something similar to what is happening at Quill. Thanks for bringing it to our attention.