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—  7 min read

4 Tips to Negotiate a Higher Credit Limit With Your Building Material Supplier


Last Updated Apr 27, 2023

Contractors trying to grow their businesses and take on larger projects often struggle to manage the cash flow to purchase the materials they need. Many contractors use trade credit to delay paying for materials and keep more cash in their pockets.

Trade credit, a type of free credit offered by material suppliers, can delay payment up to 30 to 45 days, depending on your payment terms. However, as you take on more jobs or bigger projects, you will inevitably hit the limit on your available credit. In this article, we'll share several ways you can increase your credit limit with a supplier.

Table of contents

1. Ask for it

Most material suppliers aren’t going to spontaneously raise your credit limit. However, if you have a history of making on-time payments, you can often raise your limit by just asking. A polite request to increase your limit will probably result in success.

Of course, the supplier is under no obligation to raise your limit but may do so to keep your business. If you have experienced difficulty making payments in the past, you may be able to use one of the other tactics here to get the increase you need.

2. Share recent financials

If your credit limit hasn’t been raised recently, it may be based on outdated financial statements — or, more likely, the supplier never even asked for financials when you opened your account. Sending updated construction financial statements can provide the vendor with strong evidence that you deserve a higher limit.

If you can show that you’ve been growing and seen an increase in work while remaining profitable, the vendor may feel comfortable increasing your limit.

A standard financial statement package includes four reports:

  • Balance sheet
  • Income statement 
  • Cash flow statement 
  • Work in progress (WIP) report

3. Provide a plan

Often you can request an increase in credit by showing the supplier how you plan to repay it. This can be helpful if you’ve struggled to make payments to the vendor in the past. Showing them proof of expected income will go a long way to calming their fears.

One way to illustrate this is to provide the supplier with a copy of the project contract to show the size of the project and the timeline. The supplier may also benefit from reviewing your customer’s payment history. If you are a subcontractor, you can review your general contractor’s payment activity.

Another option is to give the vendor a copy of your lien policy, which clearly demonstrates your commitment to collecting payments from your customers.

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4. Develop better trade references

Trade references are suppliers and subcontractors that you pay for materials and services. Vendors can contact them to gather information about your creditworthiness. These references give suppliers a historical context to assess their risk. 

If you have a good repayment history with a particular vendor or contractor, you can share their contact information with the supplier, and they may extend additional credit based on your trade references.

However, according to credit manager Lori J. Drake, CBA, many suppliers will look beyond the references you provide.

"Most suppliers are aware that people only give the names of references that they pay well," says Lori. "Suppliers will ask all other competitors for true references."

So while it can help to keep a running list of positive trade references, your relationship with all of your vendors is critical. Contractors should actively seek to build a good relationship with all of the suppliers they buy materials from.

If things turn sour with a supplier, it's not necessarily a red flag, but it is important that you're upfront with your vendors.

"If you have a reference that you know will give a bad rating, let your supplier know ahead of time," Lori advises. "Explain the situation, and they may not hold it against you."

Need more credit? Think beyond your supplier

Even companies with the best credit and financial statements will have a limit to how much credit a building material supplier will give them. If you find you need additional help to fund your materials purchases, materials financing may offer a solution.

Materials financing pays your supplier for your materials at the time of purchase, then collects from you when you have the cash (up to 120 days from purchase). This type of financing ensures that you get the materials you need, when you need them, without putting out a lot of cash when you can’t afford it. 

Financing gives you the time you need to bill your customer for the materials and collect them before making a payment. And it costs less than credit cards or other contractor financing options.


Construction Finance

Written by

Dawn Killough

20 articles

Dawn Killough is a writer with over 20 years of experience in construction, having worked as a staff accountant, green building advisor, project assistant, and contract administrator. She shares fundamental green building strategies and techniques in her book, Green Building Design 101. Dawn lives in Portland, Oregon.

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