Payment terms and credit in fashion wholesale: a practical guide

Fashion wholesale operates on deferred payment terms that can stretch from 30 to 120 days, creating significant cash flow risk for brands that must produce and ship goods long before they receive payment. A 2026 joint report by the University of Leicester and Transform Trade finds that 44 per cent of UK clothing manufacturers are routinely hit with demands for payment extensions, while 10 per cent see their cash frozen for more than three months after the deadline. Understanding common terms, assessing buyer creditworthiness and securing insurance are essential to managing exposure in an environment marked by retailer bankruptcies and payment delays.

What are the standard payment terms in fashion wholesale?

Net 60 terms appear on 15 to 25 per cent of B2B invoices, primarily for enterprise buyers, while Net 30 remains dominant at 55 to 65 per cent. Net terms are a form of short term credit that a vendor extends to a retailer. When you agree to Net 30, you are giving the retailer 30 days from the invoice date to pay for the goods they have received. Other common terms include Net 60 or even Net 90.

Payment terms of 60 days are considered a good deal, whilst the standard terms now are 90 to 120 days once the shipment has been received in their warehouse, so push for 60 days at best but be ready to accept 90 days. According to Macy's own terms, a vendor's invoice can remain unpaid indefinitely unless it clears a strict internal matching process, tying disbursements not to when the invoice was sent, but to whenever the retailer officially logs the inventory. Payouts are restricted to a single window in the second week of each fiscal month, and the net sum is calculated after deductions, returns, compliance fees and leftover stock are accounted for.

In practice, stated payment terms often do not reflect actual collection timelines. Net 30 invoices actually average 40 to 45 days to collect in practice. Brands should anticipate delays and factor extended cycles into cash flow planning, particularly when dealing with larger retail groups or department stores that wield significant negotiating power.

How do brands assess buyer creditworthiness?

Extending net terms without proper credit assessment exposes brands to non payment risk. Before agreeing to deferred payment, suppliers typically evaluate multiple factors to gauge a buyer's reliability and financial stability.

• Business credit scores that summarise how reliably the buyer has paid other suppliers in the past
• Payment history records showing any pattern of late or missed payments
• Financial accounts and filings that provide insight into profitability and cash reserves
• Trade references from other vendors who have extended credit to the same buyer
• Order size and frequency that justify the administrative cost of managing a credit account

New accounts often begin with more conservative terms. Requiring a 50 per cent deposit on all orders is standard practice for many high end brands. For new luxury accounts or exclusive capsule collections, requiring full payment before production begins is a common and effective strategy. As the relationship matures and the buyer demonstrates consistent payment performance, brands may gradually extend more favourable terms.

What role does trade credit insurance play?

Trade credit insurance protects brands against buyer insolvency or prolonged non payment by transferring the risk to an insurer. The global trade credit insurance market value reached 13.06 billion US dollars in 2025. The market is expected to grow at a CAGR of 8.60 per cent between 2026 and 2035, reaching almost 29.80 billion US dollars by 2035. The credit market is highly concentrated, with three major players, namely Allianz Trade (formerly Euler Hermes), Atradius, and Coface, accounting for 65 per cent of total global premiums in 2024.

Marsh's Trade Credit Risk Report 2025 highlights the growing appeal of trade credit insurance amid persistent economic headwinds. Among the 500 finance directors surveyed, 97 per cent are familiar with trade credit insurance and 91 per cent deem rigorous credit management critical. In a survey of 500 sales leaders, 55 per cent of companies with trade credit insurance reported that pricing in their sector is competitive, compared to 41 per cent of firms without coverage. The same split appears on service: 55 per cent of insured respondents rate service levels as competitive, compared with 44 per cent of the uninsured.

Credit insurers conduct their own buyer assessments and set coverage limits based on their risk appetite. When insurers reduce or withdraw coverage for a particular retailer, it often signals underlying financial distress and serves as an early warning for brands to tighten terms or halt shipments.

How have recent retail bankruptcies affected payment risk?

The fashion wholesale sector has faced heightened credit risk throughout 2025 and into 2026 as multiple retailers have entered bankruptcy or restructuring. Saks Global filed for bankruptcy on January 13, 2026, with estimated liabilities of 1 billion to 10 billion US dollars, securing 1.75 billion US dollars in DIP financing and restructuring. By April 2026, the retailer reported that more than 650 brands had resumed shipments, unlocking 1.5 billion US dollars in retail receipts and securing over 90 per cent of the retailer's projected first quarter inventory.

Last year, Coresight Research tracked a total of 32 retail bankruptcies, far below the 50 reported in 2024. Major retailers that filed for bankruptcy included Forever 21, which filed for Chapter 11 on March 16, 2025, and closed down all 364 stores by May 1, 2025. Liberated Brands, which operated a portfolio of mall brands that included Volcom, Billabong, Quiksilver, Spyder, RVCA, Roxy, Honolua, and Captain Fin, liquidated and closed all 122 of its stores at malls across the country after filing for Chapter 11 on February 2, 2025.

Many of those relationships are strained due to chronic issues with delayed vendor payments. Retailers in bankruptcy may be able to avoid, or claw back, payments a vendor received within the 90 days prior to bankruptcy. One potential solution to preferential exposure is to negotiate a prepayment arrangement, as Section 547 is premised upon payment of preexisting debts.

What protective measures can brands implement?

Beyond insurance and credit checks, brands can structure payment agreements to reduce exposure and improve the likelihood of timely collection. Clear documentation and proactive communication are fundamental to managing risk.

Send a clear, detailed invoice the same day the order ships. Ensure it includes the PO number, invoice number, due date, and clear payment instructions. Maintain regular communication with accounts receivable teams at retail partners and escalate promptly when payments become overdue. Establish internal protocols for when to halt further shipments to delinquent accounts.

Are payment terms changing in the UK market?

The government has confirmed plans for the biggest crackdown on late payment in more than 25 years. Under the proposed rules, business to business payment terms will be capped at a maximum of 60 days, with a further reduction to 45 days planned once the new limit has bedded in. All commercial contracts will also need to include a right to statutory interest on late payments.

The cost of doing business due to the impact of leaving the European Union, and challenges around access to finance and payment terms, have put additional pressure on designers. Fashion brands operating in the UK should monitor regulatory developments and prepare for the implications of shorter mandatory payment windows on buyer behaviour and their own working capital requirements.

Researched and drafted with AI support, reviewed and released by the editorial team.

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