How Much Are Defaulting Customers Costing Your Business?

By April 7, 2016Small Business

Your small business customers are important to you. You work with them closely and understand their struggles. And, you might even be friends with some.

By working closely with small businesses, you likely know that banks roughly only approve 20% of the loan requests they receive. For this, and many other reasons, you may offer your customers financing in-house.

But, is offering terms a considerable risk to your own business?

The rate of defaulters

A 2014 international survey of B2B payments found that 3.2% of respondents receivables were written off as uncollectable in the United States.

What does this mean practically? If your business is netting $100 million per year, you’re losing $30 million on defaulting customers.  

In fact, a recent survey by the Atradius Payments Practises Barometer found that 22.5% of businesses believe their biggest challenge to profitability in 2014 was collecting outstanding invoices.

How can you give your customers the financing they need, without putting your business at the risk of defaulting customers?

Consider outsourcing your financing offers to third-party FinTech companies.

FinTech companies approve a much higher rate of loan requests thank banks, as they do not base credit decisions off of credit scores alone. Similarly, some alternative lenders, like Behalf, will pay vendors up front for the goods or services their small business customers need, completely removing the threat of defaulting customers to your business.

Learn more about partnering with Behalf to offer financing here.