[bigiain]

I'd guess in the restaurant game, net-120 also has the risk of the restaurant going out of business, so any "predetermined order sizes" are less than guaranteed (a very long way from the guarantee the pre paying gives).

By the restauranteur having reservation deposits which allow them to offer to pay upfront (moving that cash flow 120 days earlier) - the wholesaler reduces both uncertainty (I wonder how much beef I need to order and how much extra I should add that I'll later sell for a loss to make sure I don't run out if sales increase?) as well as risk (What if this restaurant shuts down owing me for 4 months worth of beef?)

[martinald]

This doesn't really add up though because in reality the butcher would just use invoice finance to get the money ahead of time at a way lower cost than a 50% discount he's offering, which would probably include some insurance if the restaurant went under. It doesn't make sense. Invoice finance might cost 5-15% of the invoice. Why wouldn't you do that rather than giving customers 50% off? I can get a small discount but half price doesn't seem realistic.