Alternative to the B2B Term

In the B2B supplier world offering Term to a buyer cannot co-exist with the offering of credit cards as a form of payment.

Now there’s a bold statement. Unfortunately, it cannot exist where you will have a 100% happy merchant supplier where acceptance is open and willing. If it does then at the very least, it doubles the cost of collecting the receivable. If you were the supplier, ask yourself this one question. Why would you want to finance the receivable for the Term and then agree to bear the cost of accepting a piece of plastic at the end of that term or even later? The simple answer is you would not. It is a losing proposition.

There is however one notable exception, that of a payment of last resort. In that the buyer has no way of paying you other than to shift the debt over to a Card Issuer. Beware though as getting paid is not certain, with new rules that exist in merchant agreements. Issuers reserve the right to claw back from the merchant if the Cardmember defaults with them. You might be thinking you are smart collecting your bad debt with a credit card only to have it come back and bite you in a few months. So just a word of advice.

If we really want to look at the reason why this issue has manifested itself, we need to look back at the way for years Merchants have been sold credit card processing. Agents and companies selling Network Cards have mainly sold in price, first to B2C merchants and then to B2B merchants. This is strangely odd considering the main components of Bankcard Interchange are published and fixed, with the base line the same for all merchants. There was a perception for years of lower Interchange for Visa & MasterCard that assisted the sales process. It still exists today. Ask a merchant what they pay to accept Credit cards and the answer is “about 1.5%”. The reality is few transactions get processed at this rate or close to it. There has always been demand to compliment the pricing perception, and it hastened to create Visa and “Everywhere you want to be.” For a time, the strategy worked well. It is hard to find a B2C Industry not awash in credit card acceptance. Later still that same strategy carried over into B2B where suppliers signed on to add Bankcards as payment options but have generally failed to produce the penetration, we see with their B2C Counterparts. Think about this, there are restaurants around the country that have to have enough cash on hand at the end of the night to tip out wait staff because the cash registers are full of credit card receipts. 90-95% of sales are on Cards. This should not be surprising to us, we are a credit driven society and virtually every consumer in the USA has some sort of plastic in their wallets, be it charge, credit, pre-paid, debit. Even the