You just put $4,200 of wire, panel, and fixtures on a credit card at 24% APR. The customer pays you 11 days after you finish, which is 26 days after you bought the material. You carried that money for almost four weeks. On one job itâs $70 in interest. Across a year of a $200k shop, itâs thousands â plus the much bigger cost, which is that your card limit becomes your job-size limit.
A net-30 account at your supply house fixes most of that. Itâs free money, itâs boring, and a surprising number of two-year-old shops still havenât bothered to apply.
What net-30 actually is
Trade credit. The supply house ships you material now and bills you later â typically on a statement cycle, not per-invoice. The two common structures:
| Term | How it reads | What it means |
|---|---|---|
| Net 30 | Due 30 days from invoice date | Every ticket has its own clock |
| Net 30, prox | Due the 10th or 25th of the following month | Everything billed in a month is due on one date |
| 2/10 net 30 | 2% off if paid in 10 days | Early-pay discount, worth taking |
âProxâ terms are better than they look. Buy on the 3rd with prox-25 terms and youâre holding that money for 52 days. Buy on the 28th and you get 27. Average float on prox terms is usually 40â45 days, not 30 â which means on most jobs the customerâs check lands before the supplierâs bill is due.
Thatâs the whole point. Net-30 flips you from funding jobs to being funded by them.
What itâs worth on a $200k shop
Say you run $200,000 in revenue and material is 30% of it. Thatâs $60,000 of material a year, or about $5,000 a month. Hereâs what changes:
| Line | Credit card | Net-30 account |
|---|---|---|
| Average balance carried | ~$5,000 | ~$5,000 |
| Interest / fees | 24% APR â ~$1,200/yr | $0 |
| 2/10 early-pay discount available | No | 2% of $60,000 = $1,200/yr |
| Contractor pricing tier | Walk-in/retail | Account pricing |
| Annual swing | â | $2,400+, before pricing tier |
The pricing tier is the part people miss. Supply houses price in tiers, and the tier is attached to your account, not to the counter guyâs mood. Moving from walk-in pricing to a real contractor tier is commonly worth several points on material. On $60,000 of purchases, 4 points is $2,400. Combined, youâre looking at $4,000â$5,000 a year in a $200k shop, which for most owners is more than a month of take-home pay.
And the cash-flow effect is bigger than the dollar effect. With a card, your biggest possible job is capped by your remaining limit. With a $15,000 supply account, you can run two $6,000-material jobs at once without touching your own money. Thatâs how you stop turning down the bigger work.
How to get approved with a two-year-old business
Credit applications at supply houses are not bank loans. Theyâre mostly about whether youâre real and whether other people have been paid by you. A two-year-old LLC with clean paperwork gets approved regularly. Hereâs the package to bring.
1. Have the documents ready in one PDF
- Business legal name exactly as registered, plus DBA if you use one
- EIN letter (the SS-4 confirmation)
- State contractor license number and expiration â the license is often the gating item
- Certificate of insurance showing GL limits and, if you have employees, workersâ comp
- Business bank account â statements for the last three months if asked
- Articles of organization or incorporation
2. Line up three trade references
This is the part that stalls applications. They want three businesses you currently buy from on terms â not your plumber buddy. If youâve never had terms anywhere, you donât have references, which is the chicken-and-egg problem.
The way out: open small, easy accounts first and let them season for 90 days. Uniform service, a tool supplier with a house account, a rental yard, a lumberyard with a low-limit account, a fuel card. These approve almost anyone with an EIN. Three months of on-time payment on a $900/month fuel card is a legitimate trade reference.
3. Expect a personal guarantee, and read it
Most supply houses will ask the owner to personally guarantee the account. On a small, young business, thereâs no realistic way around it. What you can do:
- Ask for the guarantee to be capped at the credit limit rather than unlimited
- Ask whether it survives if you later close the account (push for release on zero balance)
- Watch for a clause granting lien rights on your personal property â rare, but read for it
Your LLC does not protect you from a personal guarantee. Thatâs the whole design of the document. If you want to understand what the entity does and doesnât shield, this breakdown covers it.
4. Ask for a specific number
Donât say âwhatever you can do.â Compute it: your largest likely jobâs material cost, times two, rounded up. If your biggest job runs $6,000 in material and you want to run two at once, ask for $15,000. Tell them exactly that reasoning. Credit managers respond to contractors who know their own numbers.
If they come back with $5,000, take it. Buy consistently, pay early for two or three cycles, then call and ask for a review. Limit increases after six months of clean history are routine.
5. Talk to the credit manager, not the counter
The counter guy hands you a form. The credit manager decides. Ask for a five-minute call: what you do, your annual material spend, which branch youâll buy from, what limit you need. Spend is the lever. A credit manager hearing â$5,000 a month, every month, and Iâll be a tier-two account by next yearâ is making a business decision, not a risk decision.
The rules that keep the account alive
Trade credit dies from sloppiness, not from hard times.
- Pay on the date, not before the shut-off. Supply houses put accounts on hold the day after terms expire, usually without a phone call. Finding out at 7 a.m. with a crew waiting is a half-day loss.
- Set a calendar reminder for the 8th and the 23rd. If youâre on prox terms, those are your pay-by dates. Automate it or you will miss one.
- Reconcile the monthly statement against job tickets. Counter errors happen â wrong account, wrong quantity, returns not credited. Ten minutes a month. If youâre already doing weekly job costing, this slots right in.
- Require your name on every ticket. Pick a policy: no will-call pickup without a job name written on the ticket. Otherwise material disappears into âshop suppliesâ and your job costs become fiction.
- Donât use the account as a loan. The temptation when cash is tight is to stretch the supplier. Stretch once and your terms get reviewed. Stretch twice and youâre back to COD.
If youâre already running a 13-week cash flow sheet, put your supply-house due dates on it as fixed outflows. They are not flexible.
The material escalation clause
Net-30 solves who funds the material. It doesnât solve what happens when the price of that material moves between your quote and your purchase order. Thatâs a separate hole, and in a volatile stretch it can eat an entire jobâs profit.
Two protections, and you want both:
A quote validity window. Every estimate carries a line: This quote is valid for 15 days from the date above. Short windows on material-heavy work. Thirty days on labor-heavy work is fine.
An escalation clause for accepted contracts. Something like:
Material prices are based on supplier pricing as of [date]. If the cost of any material increases more than 5% between contract signing and purchase, Contractor will notify Customer in writing with supplier documentation, and the contract price will be adjusted by the documented increase. Customer may cancel within 5 days of such notice with no penalty beyond payment for work completed and materials already purchased.
Three things make that clause work in practice. The threshold (5%) means you arenât bothering anyone over $40. The documentation requirement makes it verifiable instead of a trust exercise. The cancellation right makes it fair, which is why customers sign it.
Have an attorney in your state look at the wording before you put it in a standard contract â enforceability of price-adjustment terms varies, and some residential contracts in some states carry specific disclosure rules. The concept is standard; the phrasing should be local. The other clauses worth having in writing are here.
On signed jobs that are more than two or three weeks out, the cleaner fix is simpler: buy the material now. Thatâs exactly what your new credit line is for. Lock the price, store it, bill the customer when you install it.
Stacking the deposit on top
Trade credit and deposits solve the same problem from opposite ends. With a 30% deposit on a $12,000 job plus net-30 terms, your cash-out before the first customer payment is close to zero. Without either, you front $3,600 of material and wait five weeks.
| Scenario | Cash you front | Days youâre out of pocket |
|---|---|---|
| No deposit, credit card | $3,600 | ~35 |
| Deposit, credit card | $0 | 0 |
| No deposit, net-30 | $0 | ~5 |
| Deposit + net-30 | $0 (positive) | â |
If youâre not collecting deposits yet, thatâs the faster win â it takes one conversation, not a credit application.
Do this week
Call the branch you already buy from most and ask for the credit managerâs direct line. Ask one question: âWhat do you need from me to open a net-30 account with a $15,000 limit?â Then build the PDF they describe, trade references included, and send it back within 48 hours. Fast turnaround on the application is itself a signal â credit managers notice.