The first meaningful financing Cafe Oldrock ever received did not come from a bank or an investor. It came from a supplier who agreed to deliver on thirty-day terms instead of cash on delivery. Nobody called it a loan, but it was one: weeks of stock we could sell before we had to pay for it, at no interest, secured by nothing but a relationship.
Founders talk endlessly about equity and debt. They talk far less about the capital that actually finances most African businesses: the gap between when you receive goods and when you pay for them. In markets where bank lending to small businesses is scarce and expensive, trade credit is often the largest source of working capital a venture has. It deserves the same seriousness as any funding round.
Why trade credit matters more here
Banks lend against collateral most small businesses do not have. Suppliers lend against something different: your order history and their judgement of whether you will pay. That makes trade credit accessible to businesses that no bank will touch.
It scales with the business. A loan is a fixed amount. Trade credit grows naturally as your orders grow, so it finances expansion at exactly the pace the expansion happens.
It is cheap until it is not. Thirty days of terms costs nothing. Losing those terms, and being forced back to cash on delivery in the middle of a growth phase, can starve a business of stock overnight.
How to earn terms
Pay perfectly on cash first. Suppliers extend credit to customers they already trust. A few months of flawless, prompt cash payments is the cheapest application process available.
Ask explicitly, and ask small. Many founders never request terms because they assume the answer is no. Ask for seven days, prove it, then ask for fourteen. Credit is built in steps.
Concentrate your buying. A supplier who gets most of your business has a reason to support it. Spreading small orders across many suppliers makes you a minor customer to all of them.
Share some information. A supplier extending meaningful credit is taking a risk on your business. Letting them see that you are trading well, through a short conversation or a summary of volumes, makes larger limits possible.
How to protect terms
Never pay late without calling first. A late payment with an explanation in advance is a conversation. A late payment discovered by the supplier’s accounts clerk is a breach of trust, and it travels.
Do not use supplier credit to fund losses. Trade credit should finance stock that turns into sales within the terms. Using it to cover payroll or rent in a bad month turns a working capital tool into an unpayable debt.
Match your collections to your payables. If your customers pay you in sixty days and your suppliers want payment in thirty, the gap is a financing need you have to fill from somewhere else. Know that number, and manage it as carefully as you manage sales.
Reading trade credit like a financier
Know your days. Calculate how many days, on average, you take to pay suppliers, how many days stock sits before it sells, and how many days customers take to pay you. The relationship between those three numbers tells you how much of your business your suppliers are financing, and how much you are financing yourself.
Treat early-payment discounts as an interest rate. A two percent discount for paying in ten days instead of thirty is the equivalent of a very high annual return. If you have spare cash, taking it is often the best investment available to you. If you do not, the discount tells you how much your supplier values being paid quickly.
Report it. Supplier credit is a liability. It should appear in your management accounts with the same visibility as a bank loan, because when it is withdrawn, the effect on cash is identical.
When you are someone else’s supplier
The same logic runs in the other direction. Every business that sells on terms is lending to its customers, often without pricing that risk at all. The collections discipline matters precisely because the credit you extend and the credit you receive are two sides of the same balance sheet.
The honest cost
Building trade credit is slow, and it requires a level of payment discipline that feels unreasonable when cash is tight and every other business seems to stretch its suppliers. Concentrating your buying to earn better terms reduces your flexibility and leaves you more exposed if that supplier falters. And relying on suppliers for working capital means your growth depends on their health and their goodwill, neither of which you control. The founders who use trade credit well accept that dependency openly, and repay it with the one thing suppliers value above all: being paid exactly when they were promised.
