The credit granted by suppliers is a credit, which a supplier grants to his customer by grant of one date of payment. The credit granted by suppliers is a usual form of the financing of the movement of goods and for 30 to 90 days is usually granted. If the customer before expiration of the date of payment pays, then he can take discount payment off. The discount rate can be graduated constantly or after time intervals. To the safety device of the credit granted by suppliers by the creditor the retention of title is usually selected.

Interest rate

The for the computation of the effective interest rate of a credit granted by suppliers reads:

Annual interest annual percentage rate = discount rate * 360/Skontobezugsspanne

Discount payment reference span = date of payment - discount payment period

Example: Discount rate = 3%, date of payment = 30 days, discount payment period = 10 days

Effective interest rate = 3% * 360 days/year/20 days = 54% /Jahr

The accurate formula for the computation of the annual interest annual percentage rate reads (see Lauer, 1998, P. 64 FF.): Annual interest annual percentage rate = discount rate (100 - discount rate) * 360/Skontobezugsspanne

In the example applies:

Effective interest rate = 3%/97% * 360 days/year/20 days * 100% = 55.67% /Jahr

Customers receive a time fixed for payment (date of payment) of e.g. 30 days from their suppliers in the terms of payment usually for their calculations granted. Within this period there is a further period of e.g. 10 days, while that is granted to the customer a departure by discount payment. If the customer covers this period, the credit granted by suppliers is usually very expensive. For reasons of economy it is frequently more meaningful to take up a bank overdraft and to pay the calculation within the discount payment period.

Literature

• Lauer, Hermann: Condition management. Terms of payment arrange and intersperse, Duesseldorf optimal 1998, ISBN 3-87881-124-1

Articles in category "Credit granted by suppliers"

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