BNPL for B2B: Exploring Business Financing Options

BNPL is a popular B2B finance option that has successfully bailed out many small businesses from cash flow related problems. In fact, it is gradually emerging as a popular financial trend in recent times. BNPL is an important and reliable transaction method for B2B companies, especially for micro, small and medium enterprises. 

Small companies usually face considerable difficulties when it comes to availing a loan from traditional financial institutions. However, they still require sufficient cash to finance essential operations like buying raw materials or paying wages to employees. Such companies often turn to large B2B companies to acquire products and services on credit. 

The following sections will cover all there is to learn about this unique credit facility. 

BNPL Financing Option for B2B Businesses

Recently, Buy Now Pay Later or BNPL has transformed the E-commerce sector. Traditionally used for the B2C space, it is starting to grow in the B2B space with a number of financial institutions offering the option. 

BNPL is a financing option that allows a B2B customer to purchase necessary products/services on credit and repay them to the financier via interest-free instalments as per their convenience. On the other hand, the seller receives an upfront payment of the entire selling price from the purchaser’s financier. 

How Does BNPL for B2B Payments Work? 

In India, traditional financiers evaluate the financial health of a business and provide it with a credit line. However, when it comes to accessing formal credit, MSMEs always had a complicated relationship with financial institutions. Their lack of assets for collateral and a short credit history make lenders deem them high-risk borrowers.

However, in the age of digitalisation, new and innovative financial technology has emerged that can fill the gap in credit facilities for smaller businesses. A B2B BNPL product is especially helpful for micro, small and medium-sized companies looking for instant credit. In the BNPL model, the purchaser makes the payment in instalments over a stipulated period as per his/her convenience. 

This makes the financiers responsible for paying the seller, which makes it easy for businesses to engage in transactions. In many ways, BNPL offers an effective B2B finance option to business owners who prefer to avoid credit cards or lack a good credit score. Those with access to credit sources would also prefer BNLP as it is interest-free. 

The ‘Buy Now Pay Later’ option is a preferred option for B2B businesses because it facilitates building a good relationship with the customer. Businesses seek to increase the average ticket price of a customer because it will improve the order value of their business.

Advantages of BNPL for B2B Payments

Given below are the various advantages of BNPL for B2B payments: 

• Cost-effective Means

BNPL is a very cost-effective model. In fact, it is more affordable than choosing a credit card. Borrowers do not have to pay any extra amount for GST, annual maintenance fees or cash advances. Fintech service providers like KredX offer a merchant discount rate. This helps the seller save their debit or credit card processing fee. 

If one wishes to compare the BNPL option to credit cards for missed payments, the former will turn out to be more user-friendly. The interest rate for BNPL stays in the range of 0% to 24%. 

• Reduced Risk Proposition

The ‘Buy Now Pay Later’ option utilises data related to open banking and credit for assessing credit criteria. Additionally, it also utilises alternative data. This reduces the risk factor and improves the chances of credit inclusivity for New-to-credit businesses. 

• Attractive Option for Sellers

BNPL has gradually emerged as a popular alternative to other B2B finance options. This is because this financing model provides an advantageous transaction cycle for buyers and sellers. Sellers find this model beneficial for the development of their business. A satisfactory user experience improves the seller’s relationship with his buyers and increases the Cart Conversion Rate. 

• Helpful for Cash Crunch Issues

The BNPL model comes with a relatively flexible regulatory framework. So, business owners can remain stress-free while availing funds from fintech players. They can expand their business without worrying about problems related to cash crunches. 

• Objective Value

BNPL is a B2B finance option that emphasises cash flow related metrics instead of conventional balance sheets. Its working procedure remains in sync with the unstructured revenue stream of the Indian economy’s uncategorised sectors. This is also the reason behind the B2B BNPL effectively identifying and solving the financing needs of certain sectors of the economy. 

• Hassle-free Documentation Process 

The B2B payment option– BNPL, comes with a decentralised lending protocol. As a result, the entire documentation process is less strict than in traditional financial institutions. 

An important advantage of a lenient documentation procedure is that many MSMEs are able to fulfil the eligibility parameters of this payment option offered by fintech players like KredX. The BNPL financing option works similar to an unsecured personal loan because one doesn’t have to deposit any security or collateral to avail of it. 

Bottom Line

To sum up, this blog provides crucial details related to BNPL, a popular B2B finance option. This payment method allows buyers to afford necessary raw materials and services to continue their day-to-day operations while offering the benefits of instant payment and increased revenue to sellers. Meanwhile, the financier bears all the risks of this transaction and ensures a seamless transaction.