Trade Accounts vs Business Instalments: What's the Difference?
A trade account lets a customer pay a supplier later, with the supplier carrying the credit until it is settled. Business instalments funded through PaidTerms Capital work differently: the supplier is paid upfront, and the customer repays PaidTerms over an agreed schedule instead.
The Short Answer
Both options give a business customer time to pay. The difference is who carries the credit in the meantime. With a trade account, the supplier extends the credit itself and waits to be paid. With business instalments through PaidTerms Capital, PaidTerms pays the supplier upfront and takes on the job of collecting the customer's repayments.
Neither option is automatically better. A trade account can work well for established, reliable customers. Business instalments suit suppliers who want to offer flexibility without carrying the receivable themselves.
How a Traditional Trade Account Works
A trade account is an agreement where a supplier delivers goods or services now and invoices the customer with a due date in the future, often 20 or 30 days out, or tied to a calendar rule such as the 20th of the month following.
The supplier sets the credit terms, usually after some form of application or reference check, and then manages the account: monitoring the balance, following up on overdue invoices, and absorbing the loss if a customer does not pay. The invoice is normally settled as a single lump sum on the due date.
How Business Instalments Work With PaidTerms Capital
With PaidTerms Capital, the supplier issues the invoice as usual, and an eligible customer can choose to pay it in instalments. PaidTerms pays the supplier the full invoice amount upfront once the customer is approved, and the customer repays PaidTerms directly over the agreed schedule.
Key Differences for the Supplier
- A trade account means waiting for the due date and carrying the risk until then
- PaidTerms Capital means being paid upfront, with PaidTerms managing the customer's repayments
- A trade account requires the supplier to run its own credit checks and collections process
- PaidTerms Capital assesses each customer as part of the application, separate from the supplier's own credit policy
Key Differences for the Customer
- A trade account usually means one lump sum due on a set date
- Business instalments mean a defined repayment schedule, agreed and visible before the customer commits
- A trade account application is often a one-off setup with the supplier
- An instalment application is typically assessed per invoice or account, and is not automatic
Trade Accounts vs Business Instalments
| Feature | Trade Account | Business Instalments (Capital) |
|---|---|---|
| Who provides the credit | The supplier | PaidTerms |
| When the supplier is paid | On the due date, if paid on time | Upfront, once approved |
| Who manages repayments | The supplier | PaidTerms |
| Supplier credit exposure | Carried by the supplier until paid | Held by PaidTerms after settlement |
| Application experience | Usually a one-off account setup | Assessed per invoice or account |
| Payment structure | Single lump sum | Scheduled instalments |
| Best suited to | Established, reliable repeat customers | Larger orders or customers wanting a defined schedule |
When a Trade Account May Be Suitable
Trade accounts still make sense in plenty of situations, particularly with long-standing customers whose payment history is well understood, where order values are predictable, and where the supplier is comfortable carrying the receivable for the agreed period. For many repeat relationships, a simple account with clear terms is all that is needed.
When Business Instalments May Be Suitable
Business instalments tend to help most where an invoice is large enough that the customer's timing matters, where the supplier would rather not extend its own credit further, or where a new or less established customer would not otherwise qualify for a trade account. To understand the underlying mechanics, see what business instalment payments are.
Using Both Options Together
These options are not mutually exclusive. Many suppliers keep trade accounts for their established customers and offer PaidTerms Capital alongside it, for larger orders, newer customers, or anyone who would prefer a scheduled repayment plan to a single due date. See how business instalment payments work in New Zealand for the practical process, or read about the hidden cost of offering trade credit before deciding how far to extend your own terms.
Frequently Asked Questions
Do I have to stop offering trade accounts to use PaidTerms Capital?
No. Many suppliers run both side by side, using a trade account for established customers and PaidTerms Capital for larger orders or newer customers.
Is PaidTerms Capital the same as a trade account?
No. With a trade account, the supplier carries the credit until the customer pays. With PaidTerms Capital, PaidTerms pays the supplier upfront and takes on the customer's repayment schedule.
Explore PaidTerms Capital
See how PaidTerms Capital lets NZ suppliers get paid upfront while customers repay over time.
Read next: what 20th of the month following means, or the hidden cost of offering trade credit.
