Offering payment terms to customers is a common practice. Many companies, however, find themselves grappling with the challenges of managing in-house net terms. Credit approvals, underwriting, and risk management divert time and resources from other crucial business priorities. The approval processes are often arduous, requiring days and even weeks for a credit decision with lengthy paperwork that frequently results in low approval rates. This all eats into time that could be spent on core business functions and delivers a subpar customer experience, leading to lost efficiency and revenue left on the table.

In this blog post, we delve into the losing economics of in-house net terms and present a better alternative that satisfies the modern buyer while increasing business efficiency.

The Pitfalls of In-House Net Terms

Resource drain

Companies offering in-house net terms are often diverting essential resources away from their primary focus. These businesses are not financial institutions, and managing credit approvals internally can be both time-consuming and resource-intensive.

Slow approval processes

 In-house net term processes can be arduous, sometimes taking up to 30 days for a credit decision. This prolonged waiting period not only frustrates customers but also hampers the efficiency of the sales cycle.

Low approval rates or limited availability

Despite the investment of time and resources, in-house net terms often result in either: very limited availability where only a small subset of top customers are given net terms as an option, or disappointingly low approval rates when offered more broadly. Many companies simply cannot take on the risk and time required to give the majority of their customers net terms.

Processing fees and accounts receivable costs

Many businesses don’t even realize the true cost of offering terms in-house. What they may not even be taking into consideration is the cost of managing accounts receivable internally, which further compounds the economic strain. In addition to the cost of labor for collections and risk management, when customers opt to pay using a credit card under in-house terms, most merchants find themselves bearing the brunt of a high processing fee.

A Better Alternative

Instant decisions at the point of purchase

With Credit Key, customers receive an instant decision for a line of credit and net payment terms at the point of sale—across all B2B sales channels. This not only streamlines the approval process but also enhances the overall customer experience by eliminating the prolonged waiting periods. Customers receive credit lines up to $50K with an instant decision or up to $1M with a few more pieces of information. 

Risk management and guesswork eliminated

Credit Key takes the guesswork and risk management out of the equation for businesses. With Credit Key handling 100% of the risk and collections, companies can focus on their core competencies, leaving the financial intricacies to an experienced partner.

Choice and flexibility in payment terms

Credit Key understands that some customers require terms that extend further than 30 and even 90 days. Therefore, we offer customers the flexibility to choose between short-term financing options via net terms or pay over time options that allow them to pay over up to 12 months. In fact, our data shows that many customers prefer to pay over longer periods. Over 80% of businesses chose terms longer than 30 days when given the choice.

Industry-leading approval rates across a range of business types

Credit Key’s proprietary underwriting process enables us to average a 90%+ approval rate for Net 30 customers. Additionally, Credit Key can approve any type of business customer, from sole proprietorships to nonprofits to enterprise brands, enabling you to offer more customers the flexible payment options they need.

Increases sales and customer loyalty

Businesses that offer Credit Key witness a significant boost in the velocity and usage of their net terms offering. Credit Key's Net 30 customers place 120 orders per month on average, driving increased sales and customer loyalty for our merchant partners.

In conclusion, businesses need to rethink their approach to net terms. It’s something their customers require, but offering terms in-house is a losing game. Credit Key offers instant decisions, streamlined processes, and increased flexibility in payment terms to eliminate the hassle and resource drain of offering terms in-house. Learn more about becoming a partner.