Buy Now Pay Later for Business

Written by Robert Ferry on September 28, 2022
Buy Now Pay Later for Business

There are several different types of customers around the world. Some customers will have huge buying power; others will have minimal buying power. So some people will have cash or credit card to pay their bills immediately.

In contrast, there is a huge probability that some consumers may want your products and services but do not have the cash now to pay for them. As a result, businesses have introduced a 'buy now pay later scheme in which the product cost is divided over time. That interval can be fixed or flexible depending on the type of business.

It is beneficial for businesses to attract customers since they represent a huge portion of the market. Although not all businesses go with the BNPL scheme, those that value customer loyalty and want to sustain them for the future tend to be compatible with their buying power.

The BNPL strategy allows businesses to increase their average order value and the number of sales they make. Several businesses are extending credit to customers with the BNPL scheme to allow them to make purchases and payments over time. Such businesses may include items like furniture or vehicles that are not cheap.

Since BNPLs are convenient for customers, have minimal interest rates, and have no hidden fees, it has taken hype in the market. Customers can now make common purchases to have a home with products that are too expensive to buy in one go. BNPL is also a financing scheme that extends to all sorts of businesses. Many businesses have profited by capturing a larger customer base through the BNPL strategy.

In this article, we will look at the business-to-business buy now pay later scheme and discuss how it is helping businesses to grow. We will further talk about the major BNPL companies and enlist their features, pros, and cons to help you understand which company might be suitable according to your preference.

Let's discuss B2B in collaboration with the buy now, pay later method.

How Is BNPL Scheme Changing the B2B Trading?

The retail market has adapted well to the buy now pay later strategy, which allows consumers to purchase anything they would like and pay it off to the seller. With this method, you will not need to pay the seller any interest payment, given that you pay the dues on time.

Although BNPL has opened doors to customers for flexible purchasing, it has also benefitted retailers as they can sell large volumes of their products and services to a wider consumer base. There are credit checks that some vendors carry out to see if you are good with the payments.

The e-commerce industry received a significant boost in its business as it could attract people to make purchases and pay over a set interval. This did not disrupt the consistency of cash flow, and the businesses could earn and make payments to their suppliers and vendors. This strategy also opened doors to a new payment method while getting the product immediately.

Many businesses in the digital world have seen an annual revenue increase by adapting the BNPL scheme and offering it to customers who are good with their credit scores. Many brick-and-mortar operating stores have had a change of thinking about their business model and adapted to this strategy as well.

The B2B marketplaces have seen a change towards betterment with their supply chain as they work towards flourishing their business with a major chunk of the customers using the BNPL method of making payments. From a consumer's point of view, this financing scheme also promotes savings as they do not need to make the entire payment right now. As a result, SMEs are increasing their focus on reducing costs by optimizing BNPL in their everyday business.  

Let us look at the perks of involving BNPL in the business.

Merits of Integrating BNPL Into Business

With B2B BNPL, the sales process is simplified, and you will get a relatively higher conversion rate which will help with a credit check when you check out. The user experience is quite friendly, and it is easily understandable. Users know the deadlines when they need to make the payments, deadlines to make deposits, etc.

Adapting a buy now, pay later strategy means that the businesses will use open banking data and behavioral data of consumers to make lending decisions for them, which will aid in shopping for products. Two models work in line with the BNPL method of payment: closed loop and open loop models. With an open-loop model, any business is valued per its creditworthiness by looking at credit rating and repayment capabilities. However, a closed-loop model will work with transactions with particular vendors to minimize the overall costs of spending.

Another advantage of B2B BNPL is that businesses struggling to sell their products get a level playing field as they work with suppliers and vendors that can work with this financing. This working capital allows them to move their focus on marketing the business and getting more customers to buy products from them. The products and services are simple to implement with small enterprises' transaction- and cashflow-based underwriting.

Let us look further into the BNPL scheme from a business perspective.

How Does Buy Now Pay Later Work for Business?

The BNPL scheme works on installment payment plans, mostly segregated into four equal interest-free payments to the buyer's sender. Failing to come through to any of the payments will incur interest you would need to pay. The interest is a penalty for missing the compulsory payment and cannot be waived off for any reason. Many companies out in the market are providing these well-known buy now pay later plans, and the most famous ones include "Afterpay, Klarna, Zip, Affirm," etc.

Although the BNPL services may vary from vendor to vendor, there are certain common steps that every vendor has to follow to initiate this scheme. Let's look at the following steps for clarification.

Businesses Integrate the Services Within the Customer's Normal Checkout Process Flow

Businesses can market the BNPL strategy initiated at their store when customers pay for their goods and services. Most businesses give out pamphlets, while others have people designated to provide such information at different places. Some companies have invested in R&D, and the notification of BNPL pops up on the screen of the customers' mobile phones. Businesses also have this strategy publicized on the customers' receipts for purchases.

Customers Wish to Get the BNPL Service at Checkout

Customers that voluntarily opt to avail of this service will have to provide key personal and financial information to the customer representative of the specific business as they will do a credit check. The credit check will determine if you are good enough for the BNPL scheme. If you are good for the BNPL strategy, you will have the monopoly to decide the splitting of the total amount.

In other words, customers can choose to personalize the terms of the agreement. You can also choose to delay the payment as per your financial position, which can stand only for a certain time. Customers mostly choose to pay a bi-weekly or a convenient monthly payment. Once all the documentation is complete, you can have the respective goods as they belong to you since you are the owner. The BNPL scheme does require customers to pay some amount upfront as a deposit.

After the Transaction Is Complete, Customers Follow the BNPL Scheme for the Goods and Services

Since the terms and conditions have been signed and agreed upon, the seller will receive the payment accordingly. The payment plan will continue until all the payments have been cleared off. The remaining payments can act as debt, so it is vital to pay them off on time; otherwise, interest will follow, and the businesses are allowed to report you to the major credit bureaus, which can hurt your credit score. Fraud and credit risk elements are considered at the time of credit check.

Let's look at the benefits of BNPL Payment Plans.

Pros and Cons of BNPL Online Instalment Plans

The installment plans have several incentives for both the business and the customers. While the businesses ensure their revenue increases, the customers ensure that they get what they wish for but at a reasonable price. Keeping this in mind, businesses initiated the BNPL scheme to ease customer financial pressure. As a result, they were able to retain the existing customers and attract new customers to their business which led to expansion in terms of sales.

Pros include the following:

  • In most circumstances, you won't pay interest if you make all of your installment plan payments on schedule, which is ideal as you will not need to pay more than you have to.
  • You'll receive your order or purchase quickly if you immediately pay the initial deposit. Just ensure that you make no late payments to avoid any inconvenience.
  • You may stretch out the financial burden across several installments rather than having to pay for anything all at once, making the BNPL scheme attractive to consumers.
  • There are no hidden fees, so you need not worry about any costs you have paid but were unaware of.

Cons include the following:

  • You will pay more for your products and services than you would otherwise if you don't follow the monthly payment terms you agreed with the seller. You will have to pay for additional costs such as internet payment in the form of late payment penalties.
  • To opt for the BNPL scheme, you must fulfill a minimum spending requirement. Although this spending requirement may vary for most vendors, the common BNPL benchmark begins at $40 for Klarna. That means if you want to go with this strategy, you need to purchase something that is at least that amount. The BNPL scheme will not come in place if it is less than that value.
  • The availability of an online installment plan is not guaranteed for everyone. It may depend on various factors, such as the price of the item you wish to purchase and if you have prior experience with an installment payment plan program. You might not be permitted to purchase a costly item if you're starting to use it.

Let's look at some top BNPL companies in the market.

The Popular BNPL Companies

Several companies provide a buy now, pay later scheme to the people. This section will examine some popular businesses and discuss their features, pros, and cons. This will help you understand how these companies might suit you if you wish to get the BNPL scheme. Moreover, looking over the facts and figures will remove all questions that you may have in your mind. So let's get to it.

The following are the most popular BNPL companies that you can opt for

Funding Circle

Many small businesses have reached out to Funding Circle for funding, making it the world's leading lending platform. Funding Circle has heavily invested in its R&D and technology department to introduce risk management models. These models serve as a guide for small businesses as they receive funding fast and affordable.

With the front and back end process, the company has simplified the complex procedure for SME credit assessment, the online application process, documentation gathering, and compliance with legal standards, including fraud detection. These improvements have made the businesses confident as they come to the company for services through the BNPL scheme.

Funding Circle is not similar to a bank as it is state licensed and regulated that uses advanced technology to connect with businesses that need funds to grow. As a result, the owners of small businesses can get a much easier and better deal with Funding Circle than with a bank or credit union.

Businesses normally go with Funding Circle for the following reasons:

  • The process is simplified, efficient, and less time consuming
  • Businesses normally fit the company's lending criteria and get approved
  • The company reports all credit inquiries to the major credit bureaus that help build a credit score.

Resolve

Resolve is another B2B company that provides buy now, pay later services to people in the USA. The company is working to embed simplicity in the business processes to make things relatively easier for their clients. Resolve is continuously working with businesses to offer net terms to the customers of various businesses. It is doing that through integration with the current financial technology in place with various businesses like credit checking and cash flows and introducing an online payment portal to the customers of each business. As a result, Resolve has increased its B2B sales through happy and satisfied customers, the less financial risk to both businesses and their customers, and improved financial performance.

Several e-commerce businesses have partnered with Resolve because of two fundamental factors:

  • They are delivering incremental value to the business by integrating with the company's financials.
  • They are simplifying complexity leading to easier decision making that includes communications and to better the lives of their customers.

Resolve iterated to improve payments and financial situations of more than 1000 businesses through its direct approach, positive intent, and tenacious ownership that sees a much larger picture. The owners have been co-founders and CTO at PayPal and Affirm, so they know the right ways to make decisions for the businesses. Most often, these businesses consider the customers as their main clients, understand their problems, and try to solve them to help them and the business. Some of the most famous businesses that work with Resolve include Pulse 2.0, Finextra, FinLedger, Yahoo Finance, etc.

Ascend

Another company that has found itself in the B2B BNPL is Ascend which is based in San Francisco, USA. The company offers an all-in-one payment solution to businesses that automates payments from one end to the other. These two ends comprise an online customer payment to distribute commissions that the business earns, including payables.

The procedure is so simplified that businesses can sell more of their products and services to various customers. In this way, the customers also get a new checkout experience different from the traditional one, promoting efficiency and effectiveness.

The company has connected with different SMEs in the USA and made their daily business operations profitable in the following ways:

  • Through automated billing, fewer customers are leaving the business, which means that the company has improved customer retention and lowered default payments with its auto pay technology.
  • The businesses are only responsible for keeping a check on reporting and reconciliation while the company will handle downstream funds flow, including remittances.
  • Businesses will get a flexible and affordable premium finance option that will provide full options at the point of sale for the customers.

Credit Key

Credit Key is an instant B2B point of sale financing option in Los Angeles, USA. With this company, businesses can withdraw up to $50,000 with no interest in the first month, and then the lowest interest rate starts at 1%, and the loan term exceeds 12 months.

The procedure to apply is very simple. Businesses would need to fill out an online application that will be filled in less than 2 minutes, and they can receive a credit check response promptly. Next, businesses can see payment options that they can choose and make their preferred plan for borrowing the funds. After the order is approved, businesses can log onto their accounts to view their purchase history and upcoming payments.

On Trustpilot, the company has received 5 stars based on the reviews left by the business owners. They believe that the company has great customer service consisting of very helpful and professional staff.

The following are the factors that provide a competitive edge to the company with their clients:

  • Due to flexible financing on the client's terms, the borrowed amount can be paid off based on the merchant's timeline. The term length is as short as 30 days and extends to 12 months. Businesses can keep their operations running smoothly daily.
  • Purchases can be approved from anywhere as the company does not concern itself if businesses make purchases online or in person with a particular vendor. The company does elicit that all purchases should go through by them as they can advise the business for better payment plans.
  • The interest rates are quite low, and for the first month, the business will not need to pay any interest; after that, they will need to pay a 1% interest.

Vartana

Vartana is another B2B Buy now pay later company that businesses can collaborate with for better profitability and revenue generation. The company is based in San Francisco, USA. The company is known to boost revenue by targeting 30% more customers without compromising cash flow with the payment schedule and procedure set by the company.

Moreover, businesses can win greater opportunities which are three times more efficient due to eliminating budget conversations with simplified payment plans that are easy to understand. The company ensures that it can increase the business's cash flow by elevating the total contract value and cash collection with multi-year paid upfront contracts. Vartana also provides a robust payment platform that empowers the sales team with pre-approved payment plans. The payment platform also helps manage the end-to-end deal process through a centralized dashboard.

Furthermore, the business's customers also experience a co-branded digital checkout experience with real-time support that provides them with more assistance through a simplified procedure. The company will also integrate with the business sales tools to help the business streamline its process. So many businesses get an automated payment plan directly linked with the CRM and backed by a power API of the company.

Three factors make the Vartana company attractive for businesses which include the following:

  • A 0% APR to attract greater customers through a subsidized cost of payment plan scheme.
  • The term length is between 12-60 months with minimum or no fees.
  • With flexible capital, businesses need not concern themselves with financing from another company.

Conclusion

The guide will help you understand BNPL for business purposes and how these start-ups and well-established companies can expand to new customers, increasing their revenue. We have discussed how BNPL for business works and how you can take advantage of it as a business. Moreover, we have discussed the pros of BNPL business to help you deeply understand the perks of having a financing strategy that can align with your company's mission.

The guide will also help you understand the major buy now, pay later companies and the different merchants with whom they do this business. If you feel that you have to buy something but are bothered by its price tag, check with the seller if they have a BNPL plan that can help you with financing.

Article written by Robert Ferry
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