Our client Steve owns the construction company. He uses short-term loans from Puls to get an early payment discount from his subcontractors.
Subcontractors face long and unpredictable gaps between invoicing and payment. While awaiting payment, they still have to pay for materials, labor, and other project expenses. Therefore they offer early payment discounts to their contractors.
A common early payment discount means that if the invoice is paid within the first 10 days, the contractor gets a 3% discount. For an invoice of €1,000, the contractor can pay €970 within 10 days, thereby getting a €30 discount.
For contractors, this means an attractive return on cash. Steve takes a short-term loan from Puls at 1%, pays his subcontractors early, and gets a 3% discount. This way, Steve maintains a good business relationship with his subcontractors and keeps some return on cash. He no longer has to take money out of the business to pay his bills early.