How to Improve SMB Net Terms Approval and Drive Growth

As a vendor, offering net terms is a great way to help your business customers manage their cash flow and make larger purchases. But approving SMBs for net terms can be challenging. Many have limited credit histories, which often result in them being viewed as a potential risk, and eventually, rejected. On the other hand, nearly 80% of B2B buyers believe that flexible payment terms are essential to their business's success.

What if you’re missing out on growth opportunities from SMBs? In this blog, we’ll explore how you can boost net terms approval for SMBs while safeguarding your business, ensuring net terms benefit both you and your buyers.

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Why Offering Net Terms to SMBs is Important

Offering net terms can be a game-changer for your business. By making it easier for more SMBs to access net terms, you tap into significant growth potential:

• Unlock a larger customer base. More SMBs can buy from you, increasing your overall market reach. SMBs make up nearly 99.9% of all businesses in the U.S., so this is a huge market to explore.
• Encourage high order volumes and more frequent orders. Flexible payment terms can directly boost sales. When buyers have the option to pay over time, they’re more likely to make larger or more frequent purchases. Net terms often lead to higher conversion rates and bigger order values since buyers aren’t limited by immediate cash flow.
• Create a competitive advantage. In many industries, offering net terms is essential to stay competitive. If competitors offer flexible payments and you don't, you risk losing deals, even with better products. SMBs often choose vendors with net terms, as it gives them time to sell products before paying. In fact, 86% of buyers consider access to payment terms an important factor when selecting a vendor or supplier.‍
• Improve cash flow. Offering net terms helps your customers manage working capital by delaying payments, allowing them to maintain operations or fund growth. This flexibility is crucial for SMBs with tight cash flow and limited credit access.‍
• Establish strong customer relationships. Providing financial flexibility builds trust and loyalty, leading to long-term business.

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The Challenges Vendors Face When Extending Net Terms to SMBs

Before we dive into how to improve net terms approval, it’s important to recognize the challenges you face when assessing SMBs. These hurdles often make it difficult to confidently extend net terms, potentially limiting both your business opportunities and the growth of your SMB customers. Below are the key obstacles you likely encounter when evaluating SMBs for net terms:

• Limited credit history. Many SMBs don’t have long or detailed credit histories or other reliable financial information. This makes underwriting credit for them a challenge, making it difficult for vendors to confidently extend credit. In relation, weak financials were the reason 62% of discouraged small businesses avoided applying for financing in the first place.
• Higher perceived risk. Vendors often see SMBs as more likely to default, leading to more rejections. In August 2024, the Equifax Small Business Delinquency Index (SBDI) for 31-90 days past due increased to 1.81%, marking a 1 basis point rise from the previous month and a 14 basis point increase compared to August 2023.
• Slow, inefficient processes. Traditional credit checks can be lengthy. Approving B2B buyers for credit can take days to weeks. Even with automation tools speeding up approvals to hours or days, many businesses still face challenges. Survey shows that 53% of B2B buyers consider slow or cumbersome online net terms approval the top reason to change to another ecommerce vendor.
• Impact on growth. When SMBs can’t secure net terms, not only they miss out on opportunities to invest in inventory and scale their business, but vendors also fail to capture potential sales from them.

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4 Ways to Improve SMB Net Terms Approval

Now that we know the challenges, let's explore how you can improve your net terms approval processes for SMBs.

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1. Leverage AI-Powered Credit Risk Management

AI can revolutionize the way credit risk is assessed. Instead of relying solely on traditional data such as financial reports, trade references, and credit scores, AI analyzes alternative data like transaction history, real-time cash flow, and online footprint. This gives a more accurate picture of an SMB’s financial health. AI also speeds up the approval process, making it easier to approve more SMBs with greater confidence. By automating decisions, you can reduce human errors and biases, leading to faster approvals and fewer rejections.

Looking ahead, organizations are already exploring gen AI applications across the credit risk life cycle, signaling continuous improvements in the space.

2. Offer Flexible Net Terms Tailored to SMBs

Not all SMBs are the same, so their payment terms shouldn’t be either. Offering flexible net terms—such as net 30 or net 60—based on the financial health and needs of the SMB can make a big difference. By tailoring the terms to fit the unique risk profiles of different SMBs, you can ensure that businesses can meet their payment obligations without straining their cash flow. This personalized approach also helps you maintain long-term relationships with your SMB customers. 

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3. Streamline the Approval Process with Automation

A lengthy and complicated approval process is a major roadblock for SMBs. By leveraging automation, you can simplify the application process and make it more efficient. This not only helps reduce friction but also encourages repeat business by meeting the buyer's financial and operational needs at critical moments in the purchase process. SMBs can apply for credit quickly, and vendors can make instant decisions. This streamlined process helps you capture more business and gives SMBs the confidence to place larger orders without delay. McKinsey found that the use of automated credit-decisioning models have resulted in 20% to 40%  improved efficiency.

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4. Use White-Label Solutions to Maintain Control and Mitigate Risk

You can offer net terms without taking on the risk. White-label solutions allow you to extend credit under your own brand while outsourcing the risk to a third-party provider. This means you can offer the net terms SMBs need without impacting your cash flow or taking on additional risk. It’s a great way to maintain control of the buyer experience while ensuring that SMBs get the financial flexibility they need to grow.

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AI + Data = Reduced Risk, Higher Approvals

By using AI-powered tools and leveraging multiple data sources, you can make more accurate credit decisions. This reduces the risk of late payments or defaults and increases approval rates for SMBs. It's not just about approving more businesses—it's about approving the right ones.

With Balance, the process is even smoother. Balance not only uses AI to evaluate risk but also assumes the credit risk for approved buyers, including SMBs. This results in a 4x increase in SMB approval rates—without the extra overhead. By transferring the risk to Balance, you can offer net terms without worrying about bad debt or late payments.

Moreover, managing net terms is easy and automated. Balance handles everything from onboarding to collections, eliminating the need for in-house credit management. Balance’s white-label solution integrates smoothly into your checkout and offers a 0 DSO guarantee—ensuring you get paid on time, even if the buyer hasn’t. This stabilizes cash flow and simplifies operations, allowing you to focus on growth.

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The Growth Loop: How Automated Net Terms Build Lasting Success for Vendors and SMBs

Offering net terms creates a snowball effect that benefits both your business and SMBs. By giving SMBs payment flexibility, you remove purchasing barriers, leading to larger orders and immediate sales growth. For SMBs, net terms improve cash flow, allowing them to expand, which creates more opportunities for your business. Over time, this dynamic builds trust and loyalty, encouraging repeat purchases, stronger relationships, and long-term success for both.

By using smarter tools like AI, offering flexible terms, and making the process seamless, you can reduce risk, protect your cash flow, and fuel SMB growth—all at once. With Balance, you get a complete solution that automates credit management and takes on the risk for you. Now’s the time to make net terms work for you and your buyers.

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