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B2B buyer habits are changing fast. With the rise of AI, digital transformation, and millennial buyers, maintaining customer loyalty is increasingly challenging. The wide variety of B2B payment solutions can make it difficult to decide which ones can boost your revenue, and help your customers grow their own businesses at the same time.
Today’s B2B buyers are looking for intuitive self-service solutions that streamline the buying process with minimal wait times for finance approvals, and net terms that meet their specific needs. Any payment solution you choose needs to help all your customer segments purchase quickly and confidently.
The goal of this guide is to help you understand key differences between the most popular B2B payment options that are available — such as in-house credit programs, credit management platforms, equipment financing, and Buy Now Pay Later (BNPL) solutions.
Before making any critical business decisions about the B2B payment and financing solutions you’re going to offer customers, you need to establish your overall goals and objectives.
B2B payment providers all promise similar benefits, so you’ll also need to keep in mind the options that will be most attractive to your customer base.
Does your B2B payment solution need to:
Once you establish the “why” of your B2B payment needs, the “how” will become clearer, and your business can begin to focus on the solutions that will promote growth and customer satisfaction.
When you offer any type of extended credit to your customers, payment risk is naturally a huge concern for your business.
As you work through the decision making process, you’ll need to think about how to:
Basically - there’s a lot to think about, and a lot of potential things that can go wrong. This is why many merchants choose to work with a B2B payments provider that takes care of the bulk of payment risks for them.
If you’re a large business, implementing a comprehensive credit management system with trade credit insurance might be a worth while option to help manage risk. For small businesses, automated third-party payment solutions might be all you need.
Many industries carry a high payment risk. If you and your customers transact in one of these industries, you might need a more specialized payment solution.
If your customers typically have high-value or high-volume transactions with your business, you’ll need to make sure any B2B payment option safeguards you against this ongoing trade risk.
Regulations, currency fluctuations, and other payment factors can all put you at varying amounts of risk depending on whether your customers are domestic or international. If your customer base is local, you can opt for a more straightforward payment solution, otherwise you’ll need a payment system with built-in international credit checks, and a more advanced payments infrastructure.
Trading with domestic customers who have verified high credit ratings means you could consider longer payment terms, and use in-house credit systems to monitor their account.
If your customers have unknown or low credit ratings, any B2B payment solution you choose should have credit checks built-in, or have short payment terms and strict credit limits built in to help mitigate the potential risk to your business. You might also consider using a credit management platform which can safeguard you against risk and provide professional debt collection services.
There’s a lot of things to juggle when it comes to managing payment risk and providing an outstanding service at the same time. Many businesses are turning to modern payment solutions like BNPL to help them overcome this particular challenge.
Managing B2B payment solutions can take up a ton of internal time and resources. It might also involve investing in expensive payment software, working through implementation and integration challenges, and taking out credit insurance.
One of the key reasons that credit management and BNPL payment solutions are gaining traction in the B2B space is that businesses can reduce fixed costs and overheads, while still offering the payment flexibility and solutions that customers want.
Offering credit to B2B customers has traditionally been viewed as a sales channel. Giving customers the option to pay 30, 60, or 90 days after invoicing can make them more inclined to buy extra products and services, without this impacting cash flow.
These terms have become standard for many B2B transactions, but for many B2B merchants, it’s not ideal. Some businesses find it tough to maximize their workflows and working capital due to these slow customer payments, and they’re not able to recognize cash on the books until months after their businesses made a sale.
This can be extremely frustrating, especially if you’re a smaller business that is selling to larger accounts that require longer payment terms.
Modern B2B payment solutions can help you overcome these net term payment challenges, which is why BNPL and credit management options are becoming increasingly popular as alternatives.
By outsourcing the credit process, your business can drastically increase working capital and immediately reinvest sales revenue. At the same time, you can offer attractive payment terms to your B2B customers, and get paid in days instead of months.
If you’re looking to drastically increase your sales by offering B2B payments, you should look into longer-term payment programs that can help increase average order value (AOV), while still offering standard net terms for smaller, more frequent customer purchases.
One of the primary reasons for the growth of ecommerce-style payments in the B2B payments space is that it takes the manual steps, risks, and human resources factors out of extending credit to customers. But without a seamless integration into your current tech stack, a fully automated online payment process can be more trouble than it’s worth.
Any B2B payments provider you choose needs to integrate easily into your existing software, whether that’s your ERP, in-store system, or ecommerce storefront. This will ensure you’re up and running quickly so you can see faster time to value.
Most businesses have customers of all sizes, so it’s important that your B2B payments solution can meet the needs of your entire customer base.
You’ll need to identify what your enterprise customers need, versus what your SMB or sole proprietor customers need, and then think about what each segment is trying to accomplish.
This can be done by analyzing what each segment is buying from you, how easily they can afford to pay for it, how quickly they need it, and how they prefer to shop for it.
Your customer segments will play a big part in choosing the right B2B payments provider. Every B2B payment carries a different risk threshold for who they lend to.
For example, if you sell to small SMBs or sole proprietors, it wouldn’t make sense to use a B2B platform that has a low risk portfolio, because they won’t approve businesses with low credit ratings. In that instance, you should look for a payments offering that specializes in small business underwriting.
B2B credit management companies can offer more solutions across the board. Typically, the cheaper the transaction fee, the lower the risk portfolio. This is because the payment company expects fewer losses from more creditworthy businesses (typically midsize to enterprise accounts) so they can charge less for their underwriting.
Approval factors can be confusing when you’re trying to choose the best payment provider for your business. You obviously want to pay as little as possible per transaction, but if the payment solution you choose never underwrites a single account, then nothing has been solved for you or your customers.
Some credit management companies attempt to lower costs by taking a few of the risks out. They do this by paying 50-90% of the invoice upfront on transactions, and then pay the merchant the remainder of the invoice when the customer pays. This helps to lower costs per transaction, but it can make for an accounting nightmare on the supplier side due to multiple transactions per invoice, and needing to leave invoices open for the whole payment term.
When you’re choosing a B2B payments provider, it’s to keep your customers’ needs in mind first and foremost — versus only focusing on the cheapest payment offerings.
Your various customer segments will all be buying different things from your business and SMB buyers will likely have very different needs and cash flow concerns from enterprise buyers. Micro, small, and medium-sized businesses lack capital resources, which limits their purchasing power and spend. Larger businesses might have more to spend, but may have other restraints that govern how and what they buy.
As average order values grow, so does the need for more payment options and longer payment periods. Some customers prefer longer payment terms in general because it fits their needs better, so you should choose a payments solution that offers them this flexibility (for example, net 30 terms up to 12 months).
Small purchases and monthly recurring orders can be handled through common payment methods such as cash, credit cards, or even standard credit programs such as net 30. But larger purchases often need a bit more financial assistance. For example, customers might need a year to pay off their purchase, which is significantly more than the standard 90-day terms.
In these instances, B2B customers typically turn to solutions such as equipment financing or BNPL. According to our survey of over a hundred businesses, business owners prefer to push out payments longer than typical net term programs allow — not just for large orders, but small purchases as well. By doing so, they can increase working capital and reduce cash flow risks.
The chart below shows the percent of business buyers that elect each payment term, based on their creditworthiness.
Term preference as a percentage of all Credit Key orders by tier (with Tier 1 indicating highest creditworthiness). Despite what people think think, most customers prefer longer terms when given the choice.
Credit Key order values increase as terms increase.
Source: Key Insights Report
With B2B payments, the time it takes to receive financing approval can vary, making it difficult for customers to make timely purchases for their business.
For example, a typical in-house credit team can take anywhere from 2 to 7 days to approve a new customer. Automated credit management platforms and equipment leasing companies can beat this approval speed significantly by approving new customers in a matter of hours, but this method can sometimes take a couple of days as well.
With BNPL solutions on the other hand, approval happens right at the point of sale. This makes it a very appealing choice for B2B customers who want (or need) to make immediate purchases.
Prior to purchasing equipment and supplies, do you normally comparison shop or are you loyal to one vendor?
Source: Key Insights Report
Many merchants think that approval speed doesn’t play a role in the needs of existing customers. Once they’re approved they can use their credit line over and over again without re-applying. However, credit approval speed plays a critical role in new customer acquisition.
Say a restaurant owner’s deep fryer stops working and they urgently need a new one, but they can’t wait days to get a payment plan approved. Every minute their fryer is not working means they’re losing money, so they contact your restaurant supply company for help. If your company doesn’t have a payment solution to quickly finance this buyer, they will go elsewhere to find a supplier that does.
In our business survey, we also found 70% of customers prefer comparison shopping over being loyal to one vendor. So if you’re not offering what your existing and potential B2B customers want, they will have no problem shopping with your competitors instead.
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Download PDFSince the pandemic, consumer behaviors and expectations have gone through a rapid shift. Ecommerce sales have streaked ahead of in-person shopping, with customers looking for fast, easy, and secure ways to pay online.
34% of people in the US say they now shop online at least once a week, and Amazon’s sales revenue is now estimated at $1.6 billion each day. In-person shoppers add that they don’t want to wait in line for more than 15 minutes to be served, and 50% of shoppers say they won’t go back to a business that keeps them waiting.
These growing demands aren’t limited to B2C consumers. B2B customers want intuitive self-service solutions that streamline the purchase process and put them in the driver's seat.
Downloading PDFs, dealing with messy email threads, and faxing archaic credit applications can all cause significant delays for B2B customers — which can have a real impact on their business growth.
If your business is selling online (or intends to), you should look at payment solutions that can speed up the B2B buyer experience. Today’s customers are looking for trusted, flexible solutions that make their business purchases as seamless as their personal ones.
Now you’ve identified your business needs and your customers’ needs, let’s take a look at the pros and cons of the most popular B2B payment solutions currently on the market.
Establishing an in-house credit program can offer some great advantages for your business, including greater control over your credit policies, stronger customer relationships, increased sales, and flexible collection terms.
On the flip side, it comes with more risks and ongoing challenges than other B2B payment solutions. You’ll have to directly manage bad debtors and deal with negative cash flow, potential customer disputes, and opportunity costs.
In-house credit programs are best suited for offline sales, and should be offered only to trusted customers who have a long history with your business.
Complete control over credit policies and approvals
Increased sales compared to credit card and cash payments
Can help build strong customer relationships
Deeper insights into customer buying behavior
High exposure to payment risk
Credit approvals, underwriting, and risk management divert time and resources
Doesn’t integrate well with eCommerce-style payments
Negative cash-flow/working capital
Slow application and approval process
Credit management platforms are essentially third-party credit programs that underwrite your B2B customers for lines of credit. Typically, your business will pay a transaction fee, and the program is then free to use for your buyers. It’s similar to a credit card payment model.
This solution eliminates many problems associated with an in-house credit program, such as payment risk, cash flow challenges, and extra demands on human resources.
Good for cash flow
No payment risk (in a non-recourse model)
Automated credit approvals
Increase in sales compared to credit card and cash payments
Professional debt collection services
Approval can take between 2 to 48 hours
No payment terms over 90 days
May be a struggle to underwrite small businesses
Quality of service canvary between providers
Third-party data security and privacy concerns
This is an ideal solution for businesses that need a significant loan to buy a one-time large equipment purchase (typically industrial machinery or restaurant equipment). It can allow businesses to buy high-quality equipment that they might not be able to afford otherwise.
Most equipment financing solutions offer flexible payment terms to suit all sizes of business, depending on their cash flow. For example, a seasonal business can often arrange to make lower payments during the winter, and pay more during the summer months when business picks up again.
Better for cash flow
No payment risk
Can have tax benefits
Can be kept separate from other lines of credit
Automated credit approvals
Increased sales compared to credit card and cash payments
Low frequency use
Can incur significant additional fees for your customers over time
Buy now pay later (BNPL) solutions aren’t just for B2C buyers anymore. They offer immediate approvals and flexibility for all types and industries of B2B customers. Unlike traditional loans or credit cards, BNPL solutions often come with an added bonus of interest-free periods for your customers.
BNPL is ideal for small businesses that need to make larger orders for their business, as well as large to mid-sized businesses that make repeating or frequent orders.
Great for cash flow
Zero payment risk
Longer payment terms
Instant, fully automated credit approvals
Drastic increase in sales compared to credit card and cash payments
Increased conversion rates
Increased purchasing power for customers
Preferred payment option for SMBs
Not as widely used by large business customers
Credit Key is a leading BNPL solution providing flexible payment terms at the point of sale across all B2B sales channels. Whether your customers are sole proprietors or enterprise brands, we’ve got an option to suit them.
We take all the guesswork and payment risk out of the equation for your business when it comes to customer financing. We handle 100% of the risk and collections for you, so you can relax and focus on more important things.
With Credit Key, your customers receive an instant* decision for a line of credit, as well as net payment terms, right at the point of sale. This streamlines the end-to-end approval process, as well as enhancing the overall customer experience by eliminating frustrating wait times to get financing approved.
Your customers can receive credit lines up to $50K with an instant decision, or up to $1 million with a few extra pieces of information.
We understand the demands of today’s busy B2B customers, and their need for payment terms that extend past the standard 90 day limits. Our data shows that over 80% of businesses choose terms longer than 30 days when given the choice. When your customers use Credit Key, they have the flexibility to choose between term options from net 30 up to 12 months.
Our proprietary underwriting process enables us to average a 90%+ approval rate for net 30 customers. We can approve any type of B2B customer, from sole proprietorships, to SMBs, to nonprofits, through to enterprise brands. This enables you to offer all of your customers a unique payment option that suits them — helping you to drive sales and customer loyalty.
By partnering with Credit Key, you can offer your B2B customers better, faster financing options with more cost-effective terms than credit cards.
Credit Key also integrates seamlessly into your existing order management software and eCommerce platform, letting you approve buyer financing in real-time from their shopping cart.
To learn more or request a personalized demo, visit https://www.creditkey.com/request-a-demo.
