Buy Now Pay Later for Business: A New Way to Get Paid From Customers

by Kieran Daly
July 7, 2023
Buy Now Pay Later for Business: A New Way to Get Paid From Customers

In recent years, the buy now pay later (BNPL) consumer finance sector in the U.S. has boomed. Sixty percent of Americans have bought goods or services with it.

Now, BNPL providers have set their sights on growing their presence in the B2B space by offering businesses the opportunity to offer flexible payment terms when they sell to other companies.

In this article, we cover:

  • How buy now pay later works

  • What buy now pay later for business is

  • The benefits of B2B BNPL

How Buy Now Pay Later Works From the Customer Point of View

Before we jump into buy now pay later for business, let’s review how BNPL works in the B2C space. A customer sees something they love online and adds it to their cart. When they get to the checkout page, they’re often presented with three different payment options:

  • A credit card, like Visa or Mastercard, or a debit card

  • A digital wallet, like Apple Pay or Google Pay

  • A buy now pay later option that offers a short-term loan of a few weeks or months that charges you no interest

One of the following logos is often seen next to the buy now pay later financing option: Klarna, Affirm, PayPal, Afterpay, Zip (formerly QuadPay), Sezzle, or SplitIt.

With BNPL, a customer pays for their purchase in interest-free installments. Sometimes they’re monthly payments, but sometimes they’re weekly or biweekly.

Consumers often don’t need to make an upfront payment for their purchase. Lenders remove as much friction from the process as possible by not carrying out even a soft credit check.

If a customer makes a late payment, many lenders even show forbearance, although some do report late payments to credit bureaus, which may affect the customer’s credit score.

The Move of BNPL From Online to Offline

Lenders first started offering their BNPL services through internet retailers. They have since successfully marketed BNPL to brick-and-mortar retailers and other consumer-facing small businesses.

The way retailers accept payment is through familiar apps like Google Pay and Apple Pay. Before they visit a store, a consumer will obtain, for example, an Afterpay or Sezzle virtual card. Just as they do with a normal debit or credit card. They then add the virtual card to their payment app. When in-store, they select the virtual card in Google Pay or Apple Pay to complete a purchase.

Some lenders now offer specific BNPL apps on Google Pay or the App Store, which use the same technology as an NFC (contactless) card.

How BNPL Works From the Retail Business Point of View

So, how does a buy now pay later service work for businesses? After onboarding with your BNPL service provider (sometimes a traditional financial institution but more likely a fintech), a business connects its ecommerce platform to the lender’s API so that they can offer payment plans to their customers.

For a brick-and-mortar retailer, the business will often get point-of-sale (POS) promotional literature, posters, and decals for the store. In-person purchases are still processed through a credit card terminal that accepts digital wallets.

If a customer chooses to use BNPL as their preferred payment method, the business gets the purchase amount (minus the BNPL provider’s fees) paid upfront into your bank account within a few days.

What Is Buy Now Pay Later for Business?

Buy Now Pay Later for Business is similar to the BNPL business-to-consumer concept, but it’s for B2B transactions. Just like with consumers, buy now pay later for Business allows businesses to purchase goods and services they require and pay for them over the short term, typically in installments, rather than requiring an upfront payment in full.

Offering BNPL to your customers has the potential to grow your company, improve profits and enhance cash flows. It’s similar but more flexible than other financing solutions, like trade credit and credit lines. It’s simple, convenient, and has the benefit of speed.

Your clients can order more materials, inventory, equipment, and vital services sooner from you because being able to pay for them in installments makes them more affordable. When you make payment easier for customers, many of them will proactively choose you because of it.

Benefits of B2B Buy Now Pay Later

There are many benefits of B2B buy now pay later for both your business and your customers. Let’s take a look at some of them.

Benefits for Your Business of Offering B2B BNPL to Customers

The six most important advantages of offering Buy Now Pay Later for Business as a payment option are:

  1. Increased conversion rates and sales: You want to remove all barriers to converting a potential customer. By offering a flexible payment option, like B2B BNPL, you’re removing a possible barrier and increasing your chances of making a sale.

  2. Faster turnaround: It can take weeks to set up an invoice factoring facility and up to a day for a factorer to determine a customer's credit limit if they grant one in the first place. BNPL approval is instant.

  3. More affordable large purchases: You may be able to shift more inventory by offering bulk discounts that business customers can afford because they’re paying in installments. We’ve found that B2B BNPL can increase your order values by more than 150%.

  4. Risk reduction: Protect your balance sheet from the risk of payment default with a non-recourse buy now pay later for business lender. This is great if you sell to startups and early-stage SMBs.

  5. B2B e-commerce advantages: By making the purchasing process as simple for B2B buyers as it would be on Amazon, you remove much of the friction involved in B2B transactions.

  6. Differentiate yourself: Some business buyers may choose you over a cheaper competitor because you offer split payments and they don’t.

Benefits for Your Customers of Choosing BNPL When Paying for Goods and Services

The four main advantages of B2B BNPL for your customers are:

  1. More affordable large purchases: Yes, this is a benefit for both you and your customer. Buy now pay later for business makes expensive purchases easier to manage by breaking them down into smaller payments.

  2. No credit check: The customer’s credit score doesn't matter to most BNPL solution providers so no hard search will appear on their company's credit record.

  3. Easier budgeting: Spreading out the cost means more cash in your customer’s account, making it easier for them to meet their other fixed and variable costs.

  4. Quicker turnaround time: Purchase approval is easy and immediate. They don't have to fill out long forms like they would for traditional business financing or wait for an underwriter’s response.

Start a Buy Now Pay Later for Business Partnership With Backd

Adding a BNPL option to your website gives business customers an opportunity to spread their payment over time, making cash flow management easier for them. The benefit to your business is that you make the sale now and get paid right away. 

With an increasing number of buy now pay later options available, now is an ideal time to offer this payment solution to your business customers. 

Becoming a B2B BNPL partner with Backd is easy. When you’ve registered for BackdPay, we’ll send you a link so you can offer BNPL on your website checkout page. You can also add a BNPL link in your invoices allowing customers to pay in installments. Plus, you’ll earn up to 1% back on financed purchases as a referral fee.

To find out more about BackdPay, contact us today.

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