The Rising Cost of Funds

Have you ever been on a sales call, where you asked a question and the answer you received just did not make any sense? As sales professionals we are conditioned to be nice to our prospects. We are taught to be professional, after all we want the sale. It would do us little good to be antagonistic. We asked a question, and we received an answer. Prospects always tell the truth, right? For Financial services representatives selling in Card as an alternative payment method, knowing how your prospect borrows funds and what they pay for funds is critical to your success. Likewise, it is critical to know if they use their own funds to finance receivables and what that actually costs them in ROI. Conversely if those same funds were actually used to grow revenues as opposed to collecting it, what would the return be?


Recently, a very respected colleague of mine reached out to me to discuss the cost of funds. They led with the premise that selling in the B2B space had to be difficult at this time as the cost of funds was so low. I guess if that narrative is out there for long enough and often enough it must be true, right? Not so fast……


Businesses today that have receivables have choices to finance their receivables. They can borrow to finance them from an external source. As a business waits to be paid from their buyers, they in turn have to also pay their bills. Think of the typical business, they have labor and wages to pay, rent, electricity, and everything else to keep their business functioning. If they don’t borrow funds, it is usually because they have cash on hand, usually the product of a well-run business, but does it mean that it is being run as well as it could be. Cash not put to work in the business will fail to yield a rate of return on their capital which should exceed the value of it being used to collect debt.


It might be surprising to see, below is the average cost of so