The need for reliable and efficient payment solutions increases as businesses continue to move further into the digital age. There are three main options available.
- The company using its own treasury
- Taking out bank loans
- Using delayed payment terms. This includes digital buy now, pay later solutions for B2B commerce.
Of course, there are further trade finance instruments. Letters of credit, factoring, payment against documents, credit insurance, and so on. But, at the end of the day, the money’s generally coming from one of the three sources above – so that’s what we’ll focus on in this article.
Each of these B2B payment solutions have their own advantages and disadvantages. For buyers it’s important to consider them carefully when deciding which will work best for your business. For sellers it’s also important to identify which meets your customers’ needs and provides the most satisfaction.
Using your own treasury
The first payment solutions option is for the company to use its own treasury. Making payments this way is often the least expensive option. The company can control its own cash flow and the costs associated with it. Using your own treasury also allows the company to have more control over their payments, since they are in charge of when and how the payments are made.
However, let’s go back to cash flow! It’s important to consider that the company must have sufficient funds to make the payments. This is true whether there are agreed payment terms or if the buyer is paying upfront. If working capital is a challenge, then making the payments from your own treasury might not always be possible. Furthermore, if the company is not able to keep up with payments, they may be subject to penalties or legal action.
Using bank loans
The second payment solutions option is for the company to use bank loans. This is often the most expensive option, as the company must pay interest. We’re curious – how patient are you? We have to ask, because it also requires a long approval process. Not only that, bank loans typically require collateral in order to secure the loan.
On a basic level, there are different types of loans for different company types (i.e. startups, SMEs, corporates). Decision-making is different for each type. Decision-making for SMEs can be rather difficult and complicated. What’s your turnover? How’s your creditworthiness? How old is the company? Additionally, what happens if the company is unable to repay the loan? Furthermore, bank loans may also result in fragmentation of the purchasing process. That means there may be other institutions involved – perhaps a credit insurance institution. Like above, it could lead to significant financial and legal penalties.
TL;DR: bank loans = lots of strings attached as the lender naturally tries to minimise its risk as much as possible.
Using delayed payment terms like B2B buy now, pay later solutions
Alternative lending, e.g. embedded finance, has come a long way in a very short time. One type of embedded finance is point-of-sale delayed payment terms. These Buy Now, Pay Later solutions (BNPL) for B2B commerce are fast becoming the most convenient option. Also, they are revenue drivers, as they help to maintain a healthy cash flow = more business!
Why? Such payment solutions eliminate the need for long approval processes, collateral, and interest costs. They resist the fragmentation that financing with loans often carries with it. The BNPL solutions tend to wear many hats – credit-checker/decision-maker, lender, payer, payments collection service.
Another huge advantage of BNPL is that it really puts the seller’s customer at the forefront. From our three B2B payment options, this is the one that gives the seller a clear way to meet customer needs. Speeding up the credit approval process and taking the onus off of the buyer’s own treasury creates an unparalleled customer experience.
Three payment solutions – but which one is best?
Ultimately, payment solutions all have their own advantages and disadvantages and it is important to consider these carefully before making a decision. However, if you are looking for a convenient, flexible and cost-effective solution, a buy now, pay later solution for B2B commerce is likely your best option. We suggest Terms.Tech, which offers a fast and easy way to set up delayed payment terms – a frictionless, customer-focused experience.
How does Terms.Tech make purchasing easier for your buyers?
Terms.Tech provides flexible payment solutions. It allows customers to pay in instalments (just like a B2C pay-in-4 concept) or in one lump sum with delayed payment terms that range from 15 to 120 days. Its in-house decision-maker determines the buyer’s creditworthiness lightning fast. Plus, this delayed payment solution offers an automated payment system, making it easy to track and manage payments.
Choosing to offer Terms.Tech to buyers gives marketplaces and merchants a customer service tool. How does this help satisfy buyers and build relationships? The buyer gets the money they need without interest – that’s covered by a small fee on the seller’s side. This makes Terms.Tech very attractive at checkout. This gives marketplaces and merchants a distinct competitive advantage.
The fun doesn’t stop there! Modern payment solutions need to be flexible. Terms.Tech is customisable and offers white labelling. This allows merchants to promote their own brand, and there’s no risk for branding to get in the way of customers’ experiences.
Terms.Tech’s coverage area includes all of the EEA and Switzerland. This makes it the most geographically-beneficial delayed payment terms solution in Europe. And, it’s also available to companies from further afield who have a bank account in the EEA and complete the same KYC process required for EEA buyers. Invoicing through Terms.Tech meets the requirements of the EU’s e-invoicing directive.
If you’re looking for a reliable and efficient payment solution for your business, Terms.Tech is worth exploring. With its fast and easy setup, flexible payment options, and automated payment system, it could be the perfect solution for your business. Terms.Tech even takes care of payment collection because it’s already paid sellers upfront.
Contact our experts and find out how Terms.Tech can work for you and your customers.
