B2B Net Terms and Vendor Financing
For business loan brokers: Use this page to help clients evaluate B2B Net Terms and Vendor Financing for Brokers, prepare the right information, and discuss fit with lenders.
If the client sells to other businesses, the client’s customers almost certainly want to pay on terms. Net 30, net 60, sometimes net 90. Offering those terms wins deals, but it means financing the client’s customers out of the client’s own working capital.
B2B net terms and vendor financing solve that. A third party pays the client upfront and carries the payment terms for the client. The client gets cash on delivery, the client’s customer gets time to pay, and the credit risk moves off the client’s balance sheet.
Table of contents
How it works
The mechanics are consistent across providers:
- The client’s customer checks out and chooses to pay on terms, or in instalments.
- The provider underwrites the client’s customer, usually in seconds.
- The client is paid the full amount, typically within a day or two, minus a fee.
- The client’s customer pays the provider on the agreed schedule.
- If the client’s customer does not pay, the provider generally carries the loss.
That last point matters. Under most non-recourse arrangements the client is not chasing late payers and not absorbing bad debt.
Why sellers use it
The commercial case is usually about deal size rather than cash flow. Buyers approve larger purchases when the cost is spread, and offering terms removes a common reason for a deal to stall at the finance-approval step. For software and hardware vendors selling annual contracts, letting a buyer pay monthly while the vendor is paid the full year upfront is a genuine competitive advantage.
What it costs
Fees typically run 1.5% to 4% of the transaction, depending on the term length and buyer credit quality. Some vendors absorb it as a cost of sale; others pass it to the buyer as a financing option. Both are common.
Who this suits
- B2B sellers whose customers ask for net terms as standard
- Software and technology vendors selling annual or multi-year contracts
- Wholesalers and distributors selling to smaller retailers
- Manufacturers and equipment sellers with large ticket sizes
- Any business where offering terms would win deals but strain cash flow
Where it is the wrong tool
It does not apply to consumer sales, and it adds little for businesses whose customers already pay immediately. If the client’s margins are very thin, a 3% fee on every transaction may cost more than the working capital benefit is worth.
Compared with the alternatives
- Accounts receivable financing advances against invoices the client has already issued. Net terms financing is arranged at the point of sale, before the invoice exists.
- A line of credit funds the gap from the client’s own borrowing, leaving the credit risk with the client.
- Purchase order financing solves the supply side of the same problem, paying the client’s supplier rather than covering the client’s customer.
Lenders on Levr
Providers in the Levr lender directory offering these structures include Capchase for B2B software vendors, Backd for net terms and B2B instalments, and Merchant Growth through its Tabit product.
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Frequently asked questions
Does my customer know a third party is involved?
Usually yes, since they enter into the payment agreement with the provider. Most solutions are white-labelled so it still feels like buying from the client.
What if my customer does not pay?
Under non-recourse arrangements the provider absorbs it. Recourse arrangements pass it back to the client, so confirm which the client is signing.
Is this the same as buy now, pay later?
The mechanics are similar but the underwriting is not. B2B providers assess business credit, trading history and company financials rather than consumer credit.
How fast do I get paid?
Typically within one to two business days of the transaction being approved.