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Education

What is the cost of money in B2B? costs them in ROI. Conversely, if
those same funds were used to grow
revenue rather than on collections,
what would the return be?

Recently, a colleague of mine reached
out to me to discuss the cost of funds.
They led with the premise that selling
in the B2B space had to be difficult at
this time, as the cost of funds was so
low. If that narrative is out there for
long enough and often enough, it
must be true, right? Not so fast.
By Roger McNamara
Guide2Interchange Consider the options
Today, businesses with receivables
ave you ever asked a question on a sales call and received an have choices regarding how to finance
answer that just didn't make sense? As sales professionals, we are them. They can borrow to finance
conditioned to be nice to our prospects. We are taught to be pro- them from an external source. As
H fessional. After all, we want the sale. It would do us little good to a business waits to be paid from its
be antagonistic. We asked a question, and we received an answer. Prospects buyers, the business, in turn, has to
always tell the truth, right? also pay its bills. Think of the typical
business. It has labor and wages to
For financial services representatives selling card acceptance as an alternative pay, rent, electricity and everything
payment method, knowing how your prospect borrows funds and what they else to keep the business functioning.
pay for funds is critical to your success. Likewise, it is critical to know if
prospects use their own funds to finance receivables and what that actually If a business doesn't borrow funds,
this typically means it has cash on
hand, usually the product of a well-
run business. But does this mean the
REIMAGINE THE ART OF USAEPAY.COM enterprise is being run as well as it
could be? Cash not put to work in
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TRANSACTION the business will fail to yield a rate of
return on the capital, which should
exceed the value of cash being used
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to collect debt.
It might be surprising to see the
average cost of common types of
business loans shown in the chart
accompanying this article. These
figures are not from 40 years ago;
they are from 2021.
Banks and financial institutions are
generally for-profit businesses. They
make money by lending money to
businesses that need it. They do
this by lending to other businesses
a portion of the deposits they hold
or by lending money they borrow
from another bank, which they have
to pay for. The guiding principle for
the rate they borrow at is prime rate
or, in street terms, the Wall Street
Journal prime rate. It currently sits at
3 percent above the federal prime rate
of .25 percent or 3.25 percent.

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