Short answer: When a supplier moves you to cash on delivery, you lose the free credit you were using to carry stock, and the switchover month can double what you pay out. Talk to the supplier first about what would restore terms. To bridge the gap, a line of credit or cash-flow loan can fund in hours; property-secured loans suit bigger gaps.
Why suppliers pull credit terms
It rarely comes out of nowhere, even when it feels like it. These are the usual triggers.
- Late payments. Two or three invoices paid past terms, and the account gets flagged.
- A credit-file event. A default, a court action or a run of enquiries shows up on your commercial credit file, and the supplier’s monitoring picks it up.
- Their insurer’s limit. Many suppliers insure what customers owe them. When the trade credit insurer cuts or cancels the limit on your account, the supplier often won’t extend credit beyond it, even if you’ve always paid on time.
- Industry stress. When insolvencies rise in your sector, suppliers tighten terms across the board.
That last one is real. ASIC reports 14,153 companies entered external administration for the first time in 2025–26. That was down 4% on 2024–25, which was the highest annual figure on record. Construction made up 24.5% and accommodation and food services 14.7%. If you’re in either, your suppliers and their insurers are watching closely.
Find out which trigger applies, because the fix is different for each.
What COD does to your working capital
Credit terms are an interest-free loan from your supplier. Losing them doesn’t change what stock costs. It changes when you pay, and the switchover month is the one that hurts.
Take a building supplies store buying $40,000 of stock a month on 30-day terms. March’s stock is paid at the end of April, by which time most of it has sold. Then the supplier moves the account to COD from May. May’s delivery must be paid on the day, but April’s invoice, still on the old terms, is also due in May.
| Month | Paid to the supplier | What it covers |
|---|---|---|
| April (30-day terms) | $40,000 | March stock, mostly sold |
| May (switch to COD) | $80,000 | April’s invoice plus May’s delivery |
| June onwards | $40,000 | Each delivery, paid on arrival |
The business isn’t more expensive to run. It now needs an extra $40,000 of working capital for as long as COD lasts, and $80,000 out the door in one month to get there. That gap is what you fund, not the whole stock bill.
To size your own gap, take your average monthly purchases from that supplier and multiply by the months of terms you’ve lost. Thirty-day terms on $40,000 a month is a $40,000 gap; sixty-day terms would be $80,000. Add a margin for a busy month, because COD orders grow with your sales.
It gets worse if your own customers are slow. In the second half of 2025, large businesses paid small business invoices in 27.2 days on average, and only 69.8% within 30 days (Payment Times Reporting Regulator). Paying on delivery while you wait a month to be paid squeezes you from both ends.
Talk to the supplier before you borrow
Suppliers generally don’t want to lose a customer. They want to stop carrying a risk. Ask four questions.
- What would restore terms, and when? A specific answer, such as three months of clean payments or current financials, gives you a target.
- Is this your decision or your insurer’s? If the trade credit insurer set the limit, ask what the insurer needs to see. Sometimes it is just up-to-date financials.
- Will you do partial COD? Pay part on delivery and the rest on terms, or COD above a set limit with terms below it.
- Would security change the answer? A director’s guarantee, a bank guarantee or a deposit can restore terms. Know what you’re signing: a personal guarantee puts your own assets behind the account.
Get whatever you agree in writing, with a review date.
How to fund stock while you're on COD
| Option | Best when | Watch for |
|---|---|---|
| Unsecured cash-flow loan | A one-off switchover gap, trading 6+ months | Sized to turnover, with fixed repayments |
| Business line of credit | Ongoing COD orders: draw for each delivery, repay as stock sells | Keep it for stock, not to cover losses |
| Invoice finance | You sell on terms to business customers and have a debtor ledger | Slowest to set up, and no use without debtors |
| Merchant cash advance | Most of your sales go through card terminals | Repaid from takings, which can bite in a quiet month |
| Property-secured loan | A big gap, or COD likely to last; you own property | Takes a day or two, and puts property behind the business |
Most businesses on COD need two things: cash for the one-off switchover hit, and a way to fund each delivery after that. A line of credit often handles both. Cash-flow lending needs an active ABN, at least six months trading and business bank statements, and some loans fund in as little as 2 hours after approval. Property-secured loans run from $20,000 to $5M with no financials needed.
Our page on stock and inventory finance covers buying ahead of a season. Once your terms come back, the same facility can fund early-payment and bulk-buy discounts instead.
What a lender will ask for
A stock gap is one of the simpler files to assess, as long as the lender can see the trading. Have these ready.
- Business bank statements, through a read-only link. They show turnover and how stock money moves.
- The supplier’s notice or the email moving you to COD, and any conditions for getting terms back.
- The next order or invoice, so the amount and the date are clear. In many cases the lender can pay the supplier directly.
- Your ABN and how long you’ve been trading. Cash-flow lending needs at least six months.
- Property details, if you own property and the gap is large or likely to repeat.
The median time to funds on our cash-flow loans is 24 hours. If you need stock on a truck by Friday, Tuesday is a better day to start than Thursday.
How to win your credit terms back
- Pay early for two or three cycles. Not on time. Early. It is the fastest way to show the supplier the problem has passed.
- Ask what their credit insurer needs. If the insurer cut the limit, current financials or a short explanation of what happened can be enough to have it reviewed.
- Check your commercial credit file. Find out what the supplier saw. A disputed invoice listed as a default, or a court action you’d settled, can be enough to trigger COD. Correct what’s wrong.
- Clear the old balance. If you’re on COD with arrears still owing, paying them out in one hit often reopens the conversation faster than anything else.
- Keep the paperwork tidy. Lodged returns and current accounts make the next credit review easy to say yes to.
When COD is a warning about the business
Sometimes the supplier is right. If you’ve been paying late because sales don’t cover costs, rather than because customers pay slowly, then funding COD with a loan doesn’t fix anything. It adds a repayment to a business that already can’t meet its bills.
The warning signs are easy to list and hard to admit. You’re late with more than one supplier. The ATO balance keeps growing. New stock money is going to pay old invoices. Margins have slipped and prices haven’t moved. If that is you, see your accountant or an insolvency adviser before you see a lender.
A loan is the right answer when the business is sound and the problem is timing: one rough patch of late payments, an insurer cutting limits across your industry, or a big customer who paid slowly. In that case the cost of a short loan is usually far smaller than the sales you lose with empty shelves.
Fund the next delivery, not the next crisis
If the next delivery is due this week, start now. The eligibility check takes 60 seconds, makes no credit enquiry and shows whether a line of credit, a cash-flow loan or a property-secured loan fits your business. Check what you could get for your next order, or call 1300 863 711.
Frequently asked questions
Is cash on delivery the same as cash before delivery?
Not quite. Cash on delivery means paying when the goods arrive. Some suppliers go further and want payment before dispatch, which means you need the money a few days earlier. The funding options are the same.
Can a lender pay my supplier directly?
In many cases, yes. It can make the supplier more comfortable releasing the order.
Does being moved to COD go on my credit file?
Being moved to COD isn't a default in itself. But an overdue balance a supplier reports can appear on your commercial credit file, which is why clearing old arrears matters.
How long do suppliers keep you on COD?
There's no standard. Ask for a review date and the exact condition for restoring terms, and get both in writing.
Should I just switch suppliers?
Sometimes it helps to have a second supplier. But a new supplier will usually check your commercial credit file too, and may start you on COD or a small limit anyway.
Does it cost anything to apply?
No. There's no cost to apply or check your eligibility. All costs are set out in writing in your loan offer before you sign anything.
Will checking my eligibility affect my credit score?
No. Our 60-second eligibility check doesn't make a credit enquiry. A credit check is only done later, with your consent, if you decide to proceed.
