FAQ

What is Trade Credit & How Can it Benefit your B2B Cash Flow?

Your business can benefit from extending trade credit without running into cash flow difficulties by accelerating your procure-to-pay process, which is achieved through A/R automation.

What is trade credit?

Trade credit is an arrangement between businesses that delays payment for delivered goods and services. Credit terms vary, but payment terms are typically due in 30 to 45 days.

Merchants often use trade credit to:

  • Win new customers
  • Enhance customer loyalty
  • Gain competitive advantage
  • Increase sales volume

However, trade credit often constrains cash flow because customers don’t pay upfront.

How can you lower cash flow risks when offering trade credit?

Offering trade credit to B2B customers has historically created a cash flow mismatch because merchants were not able to collect on an invoice right away. You can minimize cash flow difficulties while allowing customers to pay on credit by:

  • Evaluating the creditworthiness of clients and offering trade credit only to clients with the capacity to pay
  • Using a global network of lenders to customize credit terms
  • Imposing credit limits for each client
  • Digitizing invoice processing and payment monitoring to accelerate collection

 

A comprehensive solution is to introduce automation, especially with built-in financing. End-to-end AR platforms like Apruve use intelligent automation to reduce inefficiencies by automating receivables and providing next-day payments on open invoices, which ultimately improves cash flow predictability. Automated trade credit management provides effective financing options for your B2B buyers without merchants risking a cash crunch.

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