Knowledge base · Factoring · 4 min leestijd · 2 Sep 2026

Early payment discounts from your suppliers: what they are worth

Working capital is almost always discussed on the sales side. Getting paid sooner, keeping receivables outstanding for less time. On the buying side sits an item that gets less attention. The discount your supplier gives for paying quickly.

Three wrapped pallets by an open loading door with a pallet truck

How an early payment discount works

Many suppliers offer a discount for quick payment. You pay within a week or ten days and get a percentage of the invoice back.

In practice it is often around 2 per cent for payment within a week. The condition is usually in the purchase terms or on the invoice itself.

Why that percentage is bigger than it looks

2 per cent looks small. Convert it to an annual basis and the picture changes.

Suppose your payment term is 30 days. The discount applies on payment within 10 days.

You are then buying 20 days of time for 2 per cent. On an annual basis that return works out above 30 per cent.

Compare that with what you pay for finance over the same period.

Why you leave that discount on the table anyway

The answer is almost always the same. The money is tied up in your own receivables.

Your client pays at the end of their term, your supplier wants paying within ten days. You do not bridge that gap with last year's profit.

The higher your purchase value, the more expensive that gap is.

What factoring changes here

With factoring the invoice amount is paid out as soon as the invoice has been transferred. That lets you pay your suppliers within the discount period.

The factoring fee and the early payment discount are then two items in the same sum. At a high purchase value the discount covers part of the funding cost.

Put those two side by side before you compare with a bank facility. The build-up of the fee is set out under rates and costs.

Who gains most from this

The effect is largest at businesses with a high purchase value. Think of wholesale and distribution, import and export and manufacturing and industry.

Against that, your stock holds money too. Inventory finance is then the second part of the same conversation.

About the author

Jaap van Aalst

Commercieel directeur, SOOF Finance

Jaap van Aalst started his first business almost thirty years ago, in staffing and secondment. That is where he saw for himself how many opportunities are lost when money sits too long in unpaid invoices.

Around eighteen years ago he moved into the factoring world, as commercial director. Since then he has sat across the table from countless business owners and seen at first hand what financing questions look like in practice. He looks further than the balance sheet: what the business does, where the opportunities are, and which form of finance genuinely moves it forward.

That is also the basis of his work at SOOF Finance. His starting point is simple: finance is not an end in itself, but a means by which a good entrepreneur delivers on their plans.

Ask your question

Frequently asked questions

It costs a fee. What you set against it are the early payment discounts from your suppliers, outsourcing your receivables management and the cover for your credit risk.

Yes. SOOF Finance works with the full receivables book. Selling individual invoices is not possible.