If you sell to other businesses and offer deferred payment, every invoice you issue carries an invisible cost. It is not just the interest rate on your credit facility. It is the sum of financing, insurance, staff, defaults, legal costs and the capital locked in receivables. When you add it all up, between 1.5% and 3.5% of your credit sales disappears just to collect on deferred terms.
The five components of the real cost
Financing (0.4 – 1.0%): includes interest on your credit facility, confirming or factoring, plus hidden commissions: opening fees (0.25 – 1%), non-utilisation fees (0.15 – 0.50%) and study charges. A facility that appears to carry a 4% rate can end up costing double.
Credit insurance (0.5 – 1.0%): the annual premium varies by sector and claims history. Typical coverage is only 80 – 90%, not 100%. After a year with defaults, the premium can rise by 20 – 50%.
Collections and administration (0.2 – 0.5%): staff dedicated to chasing payments, reconciling, managing claims and maintaining credit limits.
Uninsured defaults, recovery and legal costs (0.4 – 1.0%): the portion insurance does not cover (10 – 20%), plus recovery agency fees and court proceedings. A single major default can wipe out the profit from dozens of sales.
What does not appear on the bank statement
Personal guarantees: many SMEs must provide personal collateral to access financing, putting the business owner's personal assets at risk.
Non-renewal risk: every year, your credit lines depend on the bank's decision. A bad year in your portfolio or a change in bank policy can leave you without facilities at the worst moment.
Alternative financing: when traditional banking falls short, many companies turn to funds or lending platforms at significantly higher costs.
The real cost based on market data
Based on sector data updated to 2026 and average conditions for solvent European SMEs, the total cost of sustaining traditional trade credit ranges from 1.5% to 3.5% of credit sales. These percentages are scalable to companies of different sizes, adjusting for economies of scale and risk profile.
How to reduce this cost by 20% to 60%
Digital Trade Credit platforms (B2B BNPL) allow you to outsource the entire credit cycle: verification, scoring, insurance, financing, collections and defaults. The seller gets paid in 24 hours with zero risk and a transparent per-transaction fee that includes everything. Market estimates place the cost reduction between 20% and 60% versus the traditional model.
Calculate your real cost
We have built an interactive calculator that lets you enter your data and see in seconds how much you are spending and how much you could save.
Frequently asked questions
Because the interest rate only reflects part of the cost. You must add opening commissions, non-utilisation fees, insurance, collections staff, uninsured defaults and opportunity cost of locked capital.
Between 1.5% and 3.5%, based on European market data updated to 2026.
Yes. Digital Trade Credit platforms reduce the total cost by 20% to 60% by outsourcing everything into a single per-transaction fee.