What Is B2B BNPL for Small Businesses, and What Are Its Benefits?

by Kieran Daly
September 13, 2023
What Is B2B BNPL for Small Businesses, and What Are Its Benefits?

As a small business owner, making sales is vital. And the easier you make it for your customers to pay you, the more likely they are to buy. Enter B2B buy now pay later, also called B2B BNPL, for small businesses. 

While BNPL loans are a more familiar concept with consumers, they can also be used in the B2B space as a way to offer flexible financing options to clients. With BNPL, small businesses can increase their cash flow and encourage customers to spend more. Plus, with a number of providers offering BNPL solutions, it’s easier than ever to find a partnership and implement the payment method into your point-of-sale system.

In this article, we’ll cover what B2B BNPL for small businesses means, the advantages and challenges of BNPL, and how to determine if buy now pay later makes sense for your business. 

How Does Buy Now Pay Later Work?

Buy now pay later is a fintech service that allows consumers or businesses to make purchases and defer payment until a later date. It's a flexible payment alternative to traditional credit or layaway plans, and it has gained significant popularity in recent years, especially among B2C e-commerce firms and retailers

In fact, about 60% of consumers have used BNPL services, which are often available online or in-store. It’s especially popular among millennial and Gen Z customers

With BNPL, a customer can buy a product or service without having to put the full amount upfront. For example, a client who buys $100 worth of purchases can use a BNPL installment payment plan to make four $25 payments rather than paying $100 right away.

What Is B2B BNPL for Small Businesses? 

B2B BNPL for small businesses works similarly to how consumer BNPL programs work, except in the business-to-business space. Accepting BNPL is kind of like accepting credit cards. In other words, you’ll receive the full amount of the purchase even if the customer doesn’t have the funds immediately available in their bank account. 

For example, let’s say your client wants to make a $10,000 purchase from you. When you send them their invoice, they’ll be presented with multiple digital payment methods, such as a credit card, a digital wallet, and BNPL. 

With the buy now pay later option, the customer can make installment payments over six months to your BNPL provider, but you will get the whole $10,000 upfront. This makes it easier for them to manage their cash flow, especially during slower months, and helps strengthen your relationship with them.

BNPL essentially helps make B2B transactions easier for both you and your clients.

How Does B2B BNPL Differ From Trade Credit?

While BNPL is a type of trade credit, it is usually a bit simpler in that it has predetermined payment terms and can be offered right at the point-of-sale. While customers need a good credit score for BNPL, it doesn’t always require a hard credit check. 

With trade credit, there is usually a longer approval process, including credit considerations. The terms and payment options are usually unique to each company and contract. In other words, BNPL is easier to use than trade credit.

The 4 Advantages of BNPL

There are a number of reasons why a small business might want to offer buy now pay later to their customers. Let’s take a look at what they are. 

1. Encourages More Spending 

With BNPL, customers can afford larger orders or more expensive items, even if they don’t have the fund immediately available. For example, if your customer deals with seasonality and they’re low on working capital, they can still make a purchase and pay for it once more capital becomes available.

In fact, offering a buy now pay later can lead to a 150% increase in order values. 

This is a win-win benefit for both you and your customers. BNPL can help boost your business's revenue and cash flow. But it can also make high-ticket items more accessible to a broader range of customers.

2. Minimizes Your Risk

If you’ve ever extended trade credit or invoiced a customer after a service was already rendered, you know you’re taking on a great deal of risk. You may receive late payments or no payment at all.

With BNPL, you're not the one extending an installment plan or a delayed due date, and it’s not up to you to chase down payments. You’ll work with a BNPL partner, like Backd. The partner is the one that assumes the risk, and you receive the full payment amount instantly.

3. Makes Financing More Affordable and Convenient for Customers 

Buy now pay later appeals to B2B buyers because it lets them finance their purchase more affordably and more conveniently than a credit card or business loan.

For one, BNPL interest rates are often lower than those on a credit card. And when it comes to loans, the approval process is more involved and takes longer, which is fine for some use cases, but more than any business has time for to secure short-term financing. Meanwhile, with BNPL, your customer can apply right in their browser at the time of payment. 

4. Keeps Your Business Competitive 

If your competition offers BNPL and you don’t, you could be leaving money on the table. As BNPL becomes more common, clients expect you to offer a buy now pay later option. By integrating BNPL into your business model, you are improving the customer experience and showing customers that you’re responsive to their preferences and needs.

The Challenges of BNPL 

Of course, offering BNPL isn’t without challenges. Despite the growing popularity in BNPL options, particularly in the B2C space, your customers might not be as familiar with it for B2B.

To tackle this challenge, you’ll want to be sure you’re educating your customers on this payment option. Explain what the benefits are and how it compares to other payment methods.

BNPL also has a slightly slower checkout process. While the process is definitely faster than getting a loan from a traditional lender, it is technically still a loan. That means clients have to apply for the service, so the payment won’t be quite as quick as entering a credit card number. Be sure to clearly map out the process of using BNPL from start to finish so your customer knows what to expect. 

Partner With Backd to Start Offering B2B BNPL 

B2B BNPL for small businesses can be a great solution for businesses looking to offer more payment options. It’s affordable for customers to use and allows them to make large purchases, increasing your business's bottom line. It can contribute to increased sales, improve customer relationships, and give you a competitive edge in the market.

It's easy to apply for a BNPL service and integrate it into your invoice, online store, or point-of-sale system. Many providers make the implementation process as seamless as possible.

If you’re looking to find a B2B buy now pay later provider, look no further than Backd. With BackdPay, your customers can get the financial flexibility they need to buy higher-priced items with no cash upfront. But you’ll still receive the full payment instantly.

Plus, the merchant portal allows you to easily manage and check the status of your orders. Partner with Backd and increase your clients' purchasing power today.

What would you do with the right amount of capital?

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