The supplier offers cash terms instead of a personal guarantee
Compare a genuine supplier cash-on-delivery alternative with guaranteed trade credit, separating immediate working-capital needs from proposed personal exposure.
Corporate Recovery Partners
01 / 06
There may be a different purchasing arrangement
The supplier will open a credit account only with a personal guarantee, but offers payment before supply as an alternative. Examine both proposals before choosing. One may require more immediate business cash; the other may ask a person to take on obligations that need independent advice. Neither should be described as free simply because its cost is less visible in the first invoice.
Ask the supplier for the price, payment timing, order limits and delivery arrangements under each option. Check whether both are genuinely available for the required goods. Do not assume the cash price is the same as the credit price or that a verbal alternative has been approved by the person who controls the account.
Moneysmart's loan-guarantee guidance recommends independent advice before signing. A trade-credit guarantee needs assessment on its own wording and circumstances. Give the complete supplier documents to a lawyer, including any personal security requested. The amount the business expects to buy next week does not by itself explain the personal obligation the proposed document may create.
Imagine the next materials order costs $12,000 and the customer will pay several weeks later. Cash terms require funding before supply, while credit terms defer the supplier payment but require the proposed guarantee. The business needs to understand the cash gap and the individual needs to understand the legal exposure. The comparison cannot be resolved by saying credit preserves cash.
Use the actual order programme and customer receipts to assess the upfront funding requirement. Include other due obligations rather than allocating the whole bank balance to the supplier. Do not use an unapproved overdraft or uncertain customer payment as if it were available money. If neither option is sustainable, seek advice before committing to the purchase or giving personal assurances.
If an option is agreed, retain the accepted terms and ensure purchasing staff follow them. Keep the guarantee decision distinct from routine authority to place orders. The practical purpose is to compare two real commitments with their different effects, rather than signing a personal document merely because the alternative requires a more visible payment today.
