Series 29: Supplier Credit Isn't Always the Best Deal: What Smart Importers Consider Before Choosing Financing

Every importer eventually faces the same decision: whether to finance purchases through supplier credit or through a bank. Both options help businesses complete international trade, but they offer different advantages depending on the transaction, supplier relationship and working-capital requirements.

The financing decision affects more than interest costs. It can influence supplier negotiations, purchasing flexibility, payment risk and the ability to place future orders. Businesses that evaluate the full commercial impact, not simply the financing cost, are often better positioned to manage cash flow and support long-term growth.

When Supplier Credit Makes Sense

Supplier credit allows buyers to receive goods before making payment, typically within agreed payment terms such as 30, 60 or 90 days. For businesses with established supplier relationships, it can reduce immediate pressure on working capital without arranging additional financing.

However, supplier credit is not always available. New suppliers may request advance payment, reduce credit limits or shorten payment terms until trust has been established. Some suppliers may also build financing costs into product pricing or offer fewer discounts in exchange for longer payment terms. What appears to be lower-cost financing may therefore come with a higher purchase price or less negotiating flexibility.

For importers managing multiple overseas suppliers, relying entirely on supplier credit may also limit purchasing flexibility when market conditions change.

When Bank Financing Creates Greater Flexibility

Bank financing allows businesses to separate financing decisions from supplier negotiations. Instead of depending on a supplier's credit policy, importers can choose financing solutions that best match the structure and level of risk of each transaction.

A Letter of Credit provides payment assurance once agreed trade documents have been presented, helping businesses establish confidence with new suppliers. Import Bills for Collection facilitate document exchange and payment under agreed trade terms when trading relationships are already established. Bank Guarantees support contractual commitments, while Trade Invoice Financing, Accounts Receivable Financing and

Collection Services help businesses improve liquidity and manage cash flow across the trade cycle.

Rather than replacing supplier credit, Trade Finance provides businesses with additional financing options when commercial terms, payment risk or working-capital requirements differ from one transaction to another.

The Lowest Cost Isn't Always the Best Decision

Choosing between supplier credit and bank financing should not be based solely on financing cost. Businesses should also consider supplier discounts, payment terms, inventory turnover, purchasing flexibility and the impact on working capital.

According to the Asian Development Bank's Global Trade Finance Gap Survey published in January 2026, the global trade finance gap remained at US$2.5 trillion in 2025, equivalent to around 10% of global trade. The scale of the gap highlights the importance of access to appropriate financing as businesses manage international transactions, working capital and changing supply chains.

"The objective isn't to replace supplier credit," said Chan James, Trade Finance Sales and Advisory Director at Wing Bank. "The objective is to select the financing structure that best supports each transaction. Businesses should evaluate payment terms, supplier relationships and working-capital requirements before deciding how to finance imports." “behind every successful shipment there is a smart trade finance” he added.

Choosing the Right Financing Strategy

Supplier credit and bank financing each have advantages, but they serve different business needs. Businesses that assess financing on a transaction-by-transaction basis are often better positioned to manage payment risk, preserve working capital and strengthen supplier relationships.

Wing Bank provides a comprehensive range of Trade Finance Solutions, including Letters of Credit, Import Bills for Collection, Export Bills for Collection, Bank Guarantees, Trade Invoice Financing, Accounts Receivable Financing and Collection Services, helping businesses choose financing solutions that match their trade strategy and business objectives. 

Request a meeting with a Trade Finance specialist: https://bit.ly/4i8clAL. For more information about Wing Bank's Trade Finance Solutions, visit any Wing Bank branch or call 023 999 989.