Betting on B2B: Why We’re Backing Nectarine Credit

It is not actually money, but credit that makes the world go round. When we think of credit, we often focus on our own — consumer credit. Nearly all of us have had the experience of purchasing something on credit, or examining our own credit scores: the three-digit numbers that still underpin much of consumer lending. The past few years have been replete with attempts to make consumer credit ­more — more fair by incorporating alternative or often overlooked streams of payments and creditworthiness data, more transparent by giving us close to real-time visibility into the factors that push our scores one direction or another, and more accessible by providing new on-ramps to a broader set of consumers.

Startlingly little, however, has been done to reshape the business side of the credit equation. Traditional lending, where a bank or other financial institution underwrites a business customer and provides interest-bearing financing is one arena, and has seen a bit of innovation. But, this only covers a part of the picture. An estimated $3–5 trillion — with a capital T” — is extended in the form of vendor or trade credit at any given time between companies in the US. These arrangements look like the net 30, 60 or even 90-day payment terms that are near-ubiquitous in B2B purchases. Vendor credit is essential. While no money exchanges hands, these are essentially interest-free “loans.” This extension of credit allows businesses to purchase goods and services as they’re needed and consumed, without the burden of costly institutional lending and upfront cash payments. Ideally, it empowers commerce and trade to occur at a quicker clip and in a larger and more impactful way.

Businesses, though, are rarely sophisticated when it comes to vendor credit. Through the course of normal operations, they often find themselves with purchase orders ranging from thousands to millions, and the need to make quick, informed decisions on which customers to extend credit to, how much, and on which terms. Historically, they’ve relied on people and paper — internal employees who act as credit managers and mountains of documents (incorporation details, bank records, payments/transaction history, other vendor references). This leads to a mess of a process and oftentimes costly delays. An estimated 15%+ of b2b invoices are overdue, with close to a third of those ending in default. That equates to hundreds of billions per year in revenue and opportunity cost.

Even in the best cases, businesses with teams of credit managers and more established underwriting procedures face critical flaws in process. A one-time creditworthy customer may not always be a low underwriting risk. Covid put this at the forefront for many — B2B payment defaults nearly doubled through the pandemic, as many found that their customers’ financial situations rapidly decayed. The data landscape has shifted as well. Companies take payments and conduct business on new platforms and through more varied channels. Credit approval workflows are fragmented across tens of touch-points.

All of this is why we’re thrilled to be working with Nectarine Credit, led by Alex Armitage and Gagan Chaudhari. Nectarine Credit’s mission is simple: modernize the B2B credit stack from application, to review, through reporting and all the way to approval of terms. Nectarine Credit makes it easy to integrate and sync all relevant application data (incorporation, finances, transaction history, references, and more) and work through a seamless underwriting and approval flow all in one SaaS platform. Nectarine Credit is modernizing the current cumbersome vendor credit workflow from its very foundations. Clients benefit from transparency, speed, and ultimately a more personalized process that can reward and reflect their credit profiles. Meanwhile, business lenders cut down on lengthy procedural inefficiencies and make decisions with a far-richer dataset.

Credit applications and approvals are only the first step. From there, Nectarine Credit has ambitions to push the entire B2B credit space towards a more real-time understanding of creditworthiness and risks. Through deeper customer integrations and leveraging external and crowdsourced data, Nectarine Credit can create a living credit application for a business and make the idea of credit “reviews” and ongoing monitoring more automatic.

Talk to most business leaders, and you’ll hear endless stories of the shortcomings of business credit scores — much of the data is self-reported or dated, and tough to rely on in isolation. Nectarine Credit has the ability to build richer profiles over time and to contextualize them by vertical or industry. Ultimately, by advancing B2B credit, Nectarine’s goal is to further empower B2B commerce.

We’re lucky to be leading Nectarine Credit’s Pre-Seed and to be working alongside co-investors Cascade Fund, SK Ventures, and K5 Global.

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Amplify is a first check fund based in LA backing the strongest technical and product teams at the earliest stages. You can get in touch with us here. Want these updates delivered to your inbox? Join our newsletter!