One in six B2B suppliers now give business customers over two months to pay their invoices, according to a joint report by economic consultancy Cebr and European small business lender iwoca.
The Credit Where It’s Due: Trade Credit and Digitisation Report shows a significant jump in the number of suppliers offering repayment terms longer than 60 days – from seven per cent in 2020 to 17 per cent in 2024.
This rise comes as more businesses demand greater payment flexibility from suppliers. Over 84 per cent of suppliers say they’ve had to adjust payment terms for business customers – almost double the rate from four years ago (46 per cent).
Flexibility critical for closing deals
Suppliers are adjusting to this shift in the payments landscape to secure sales, the iwoca report reveals.. Two-thirds (66 per cent) of B2B sellers report that offering trade credit has boosted their sales. In fact, three out of four suppliers extend longer repayment terms to loyal or large customers, or for bigger orders.
On the buyer’s side, nearly half (48 per cent) of surveyed businesses admitted to avoiding or considering avoiding suppliers that offer short or rigid payment terms.
Adjustable payment terms bring risks
While flexible terms are a welcome change for buyers, the report finds that outstanding payments have become more common in 2024 than they were during the height of the pandemic. Nearly half (48 per cent) of UK suppliers report that trade customers owe them more than £10,000, a 13 percentage point rise since 2020.
Only 30 per cent of suppliers express high confidence in receiving repayment for their invoices.
Additionally, fewer than one in three (29 per cent) express strong confidence in assessing their customers’ creditworthiness. Despite the risks, just 58 per cent of suppliers offering flexible terms conduct credit checks, highlighting the need for resources that help businesses manage adjustable payment terms more effectively.
Focus on growth
Lara Gilman, iwocaPay co-lead, commented: “The sector has always talked about payment terms in the context of big corporations trampling over small ones. But since the pandemic it’s clear that across the board, firms including SMEs are now calling for flexibility from their suppliers to keep business moving.
“However, the shift towards trade credit comes with significant risks for B2B suppliers. iwocaPay, our B2B buy now, pay later solution, is designed specifically to address this problem by taking on the risk for B2B suppliers, it allows them to offer flexible payment terms while ensuring they get paid on time. This gives them the time and resources to focus on growth.”
Christopher Breen, head of economic insight at Cebr, suggests that while trade credit continues to be an important tool in B2B transactions, it presents challenges for suppliers, such as late payments and the potential accumulation of bad debt.
“Despite these risks, an overwhelming majority of B2B suppliers offer some form of payment terms, recognising the importance of trade credit in securing sales. The already widespread use of trade credit systems presents an opportunity for them to be modernised by the use of digital solutions, which could help both suppliers and customers to navigate these financial pressures effectively.”
iwocaPay from iwoca offers a solution to B2B payment challenges by addressing both the payment process and terms. It provides businesses with a system that includes 90-day payment options, allowing suppliers to offer flexible payment terms. Customers can make instant payments using a straightforward, two-click process powered by open banking technology.
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