How Do Net 30 Terms Work?

7 min read

Executive Summary

"Net 30"/"NET-30" is a popular term thrown around in the business credit circles. What are they, and what can they do for your business? We're breaking down everything you need to know, plus how to offer net 30 payments terms as a B2B business.

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As a business that buys things, taking advantage of Net 30 terms can help you manage your cash flow (and could help you build business credit). Additionally, if you’re a B2B small business owner, offering net 30 payment terms can grant you a competitive edge. But are they right for your business? Here’s what you need to know.

Table of contents


What are net 30 terms?

Net 30 is a type of payment term that gives buyers 30 days from the invoice date to pay the full amount due. For example, if you issue an invoice on January 1st with net 30 payment terms, your customer must pay the amount by January 30th. In essence, it’s a form of trade credit. You may also come across net 10, net 45, net 60, or even net 90 terms. In all cases, the number refers to the number of days a customer is given to pay the full amount.

How do net 30 payment terms work?

When you go to a store and buy a carton of milk, you have to pay before you can leave the store. In that scenario, the payment terms are net 0 — and that’s the case with most B2C transactions. However, when businesses are selling to other businesses (B2B), longer payment terms are often allowed.

For example, let’s say a grocery store receives a wholesale shipment of cereal on the first of each month, and has agreed to net 30 terms with the distributor. The distributor will invoice the store on the 1st with each cereal delivery, and the store will need to pay the bill by the 30th.

How can your small business use net 30 terms?

As a small business owner, you can offer net 30 terms to your buyers and request them when you’re the buyer. Depending on the business you request trade credit from, obtaining net-30 terms could help you build business credit with one or more of the credit bureaus. Here’s a closer look at how both ways work.

Request net 30 terms when you’re a buyer

In addition to offering net 30 payment terms, you can also request them when you’re buying products or services from other businesses. If an agreement is made, you’ll be given 30 days from the date you receive an invoice to pay (instead of having to pay upfront).


Having the extra time to pay your bills can benefit you in the same ways it benefits your buyers. It can enable you to purchase additional products and services and improve your cash flow.


On the downside, if something happens and you aren’t able to pay on time, it can damage your business credit and your partnerships with vendors, suppliers, manufacturers, service providers, etc. Further, late penalties can apply.

How can you get approved for net 30 terms?

Each business sets its own rules on when payments are due. Some will require immediate payment while others offer net terms.

You can improve your chances of getting approved for net 30 or longer payment terms by building up your business credit score. A key to establishing business credit is opening credit lines, keeping your balances low, and making your payments by or before the due dates. Then, if a company requires a credit check, you’ll be prepared.

When companies don’t check credit, they may have a probationary period before offering any credit terms. For example, you may have a six-month payment history before you get access to the net 30 payment terms. To find out how it works, you’ll have to check with each of the businesses you buy from.

Offer net 30 terms to your buyers

Net 30 terms can act as an interest-free form of credit for your buyers. You deliver your product or service and allow them up to 30 days to pay. But why might you want to do that?


Net 30 terms can help you to gain more customers that otherwise wouldn’t be able to buy from you. For example, if a company wants to buy your products but has limited cash flow, the net 30 terms could enable them to get the product, make sales, and then pay you out of their profits. It can also enhance customer loyalty by giving buyers a reason to stick with you.


On the downside, net 30 terms open you up to more risk and can disrupt your cash flow. Instead of being paid at the time of service or delivery, you’ll be waiting a month. Additionally, you’ll often need to build back-end processes to support the extended payment terms (e.g. more advanced accounting software, invoicing software, etc.).

Pro Tip: Net 30 terms don’t have to be all or nothing. If you find them to be too risky for all new customers, you can limit the offering so it only applies once certain requirements have been met. For example, you could perform a business credit check on new customers, or only offer the option once a customer has paid on time for six consecutive months. Alternatively, you could start with net 10 terms, and gradually increase the term length with consistent payment.

When does it make sense to offer net 30 terms?

Net 30 payment terms often don’t make sense for B2C companies. However, as a B2B small business owner, they can give you an edge. But what should you know first?

First, find out the most common payment terms offered in your industry. Are your competitors offering net 30 or longer payment periods? If net 30 or another payment term is commonplace, you’ll likely need to offer it (or beat it) to remain competitive. However, if it’s not, you can use net 30 terms as a way to set your company apart.

Another factor to consider is your cash flow. Are you struggling to keep up with your business expenses and afford regular operations? If so, offering net 30 won’t be the best option. In fact, in that case, you may want to negotiate net 30 terms from your suppliers, service providers, vendors, etc.

Frequently asked questions about net 30 terms

Still not clear on net 30 terms? Here are answers to some of the most frequently asked questions.

When exactly does net 30 start?

Net 30 payment periods start on the date that a payee delivers the invoice. For example, if you receive an invoice on July 1st, the 30-day countdown starts on the 1st.

Do net 30 terms include weekends?

Net 30 terms refer to 30 calendar days (not business days), so they include weekends and holidays.

What are net 30 discounts?

If a business wants to incentivize early payments, it may offer customers an early payment discount. Alternatively, it may charge a late fee if customers pay late. In some cases the discounts and penalties will be tiered, so you can save more the earlier you pay, but will owe more as your payment gets increasingly past due.

What does 2/10 net 30 mean?

Net 30 payment terms may come with a fraction like the 2/10 above. The first number refers to the discount percentage a customer will get, while the second refers to the number of days a customer has to get the discount. So, in the case of 2/10, the customer will get a 2 percent discount if they pay within 10 days.

What are alternatives to net 30 terms?

If you’d like net 30 terms but are having trouble getting approved, a good alternative is a business credit card. You can often make a purchase and won’t be charged interest if you pay it off (in full) by your next payment due date.

For example, let’s say you purchased inventory with your credit card on February 1st and your billing cycle ends on February 28th. If your payment isn’t due until March 10th, you would have 38 days to pay off the balance without any interest charges. A business line of credit or loan can also be helpful, however, lenders typically charge interest right away.

Want to learn more about your small business credit and finance options? Check out these blogs:

About the author

Jessica Walrack

Written by Jessica Walrack

Jessica Walrack is a personal and business finance writer who has written hundreds of articles over the past eight years about loans, insurance, banking, mortgages, credit cards, budgeting, and all things credit. Her work has appeared on Bankrate, The Simple Dollar, The Balance, MSN Money, and Supermoney, among other publications. Her love of a good number breakdown and passion for making complex concepts easy to understand makes writing about finance a natural fit.

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