There is an old saying that “everything old is new again” That is as true in finance as it is in fashion. Businesses are always looking for a competitive advantage so they are quick to move strategies when a market gets crowded. They have gone from the trend of just-in-time inventory, to extended payment terms from vendors, to finance that inventory, to shipping straight from the manufacturer. They will use anything to cut capital outlay and improve cash flow. Fifty years ago sellers looked more at margin than cash flow and would ask for discounts to cover the cost of holding inventory. Fifty years ago it was common to see terms of sale at 2/10 net 30.
These were terms given to buyers allowing them to make a choice between getting a better margin, by taking a 2% discount paying in 10 days (2/10) or holding on to cash by paying in 30 days (net) the full amount of the invoice. To many sellers these terms became obsolete as buyers squeezed margins and cut middlemen distributors. Sellers started accepting credit cards for purchases of wholesale goods. Also, computers added efficiency and speed in the market place dooming these old fashion terms between buyer and seller… Until now…
Buyers are realizing that sellers, by accepting credit cards such as MasterCard, Visa and American Express Open are still giving discounts for early pay by paying the bank cards exchange fees. Bank cards have just barely made inroads into the wholesale transaction between buyers and sellers. There are three reasons for this:
* The lack of higher credit limits needed by buyers to make multi-million dollar purchases
* The lack of sellers signed up in the bank card network, and …
* The resistance of sellers to give up anywhere from 2.5% to 3.5% of the sale.
These issues opened the door for financial entrepreneurs to fill a much needed gap by providing buyers and sellers with a new and competitive way to buy and sell goods. These new services by private financial institutions are filling a need. Services like AeroPay Express allow buyers to pay any vendor, regardless of them being in the network, at a transaction fee at the 1950’s discount of 2%. Buyers also get the benefit of receiving a rebate from AeroPay if they pay net 30. An old Idea that’s new again.
You can make those multi-million dollar purchases with AeroPay credit lines up to 10 million dollars.