Finance term
2/10 Net 30
Also known as: 2/10 net 30, 2-10 net 30, early payment discount
Definition
2/10 Net 30 is a payment term offering a 2% discount if the invoice is paid within 10 days, otherwise the full amount is due in 30 days. The annualized cost of not taking the discount is approximately 36% — almost always worth taking if you have the cash.
Detailed explanation
The notation '2/10 net 30' reads as: '2% discount if paid within 10 days; otherwise full amount due in net 30 days.' It is the most common early-payment-discount term in B2B commerce, but many buyers skip the math and just pay at day 30.
The annualized cost of forgoing the discount: you're effectively paying 2% to borrow money for 20 days (days 11 to 30). Annualized: 2% × (365 / 20) = 36.5%. That's the rate you're implicitly paying for the extra 20 days of float. Almost any financing source — bank line of credit, SBA loan — is cheaper than 36.5% APR. So if you can pay within 10 days, take the discount.
Conversely, from the seller's perspective: offering 2/10 net 30 accelerates cash collection but costs 2% of revenue. At scale that's significant — a business doing $5M in B2B sales offering 2/10 net 30 and having customers take it would cost $100K/year. The tradeoff is faster cash conversion and lower DSO. Whether that's worth it depends on the seller's cost of capital and receivables financing costs.
◈ Worked example
- Invoice: $10,000, terms 2/10 net 30. Pay by day 10: $9,800. Pay by day 30: $10,000. Cost of waiting the extra 20 days: $200. Annualized cost: ~36.5%.
- A manufacturer with a $500K revolving line of credit at 8% APR should always take 2/10 net 30 discounts — they can borrow at 8% to pay invoices early and capture a 36% annualized return on the discount.
- A cash-constrained startup without credit access may rationally skip the discount — paying at day 30 preserves cash when the cost of short-term borrowing exceeds 36% (payday lenders, MCAs at high factor rates).
Common questions
The most-asked questions about 2/10 Net 30 — answered straightforwardly.
Should I always take an early-payment discount? +
Yes, if your cost of capital is below the annualized discount rate. For 2/10 net 30, the annualized rate is ~36%. Any business with access to a line of credit at 6–15% APR should always take the discount — borrow on the line, pay early, capture the discount. Only skip if you're in a severe cash crunch with no credit access.
What does 1/15 net 45 mean? +
Same pattern: 1% discount if paid within 15 days, full amount due in 45 days. The annualized cost of not taking this discount: 1% × (365/30) ≈ 12.2%. Less compelling than 2/10 net 30, but still favorable compared to most commercial borrowing rates.
Do early-payment discounts affect business credit? +
Taking early-payment discounts doesn't directly affect business credit scores like Paydex. Paydex measures whether you pay on time relative to stated terms — paying early scores the same as paying on the due date (both count as 'paid as agreed'). However, early payment does improve your DSO and cash conversion cycle, which lenders view favorably when analyzing cash flow.
Further reading
This glossary entry is educational content. ClearValue Lending is a business & personal financing platform — not a lender, broker, or financial advisor. Specific product terms vary by lender; verify with the lender or issuer before applying. See privacy policy.