In the business-to-business (B2B) world, it often seems like big companies have all the advantages. They have more resources, more customers, and more experience. But in recent years, a new trend has emerged, giving smaller businesses a chance to compete: buy now, pay later (BNPL) in B2B.
From Amazon to Afterpay, this type of payment option has taken the retail world by storm. Now, it’s making its way into the B2B space, and more and more small-to-medium enterprises (SMEs) are taking advantage of it. Small businesses are using BNPL to unlock growth and level the playing field against their larger competitors.
So what is buy now pay later (BNPL) and how can it benefit your business? Let’s take a closer look.
Buy Now Pay Later in B2B
Buy now pay later (BNPL) is a type of financing that allows businesses to purchase goods and services when they want, and pay for them later. This can be done in several ways, but the most common model is through instalments. With this type of BNPL, businesses receive the goods or services upfront and then make regular payments until the full amount is paid off.
Initially designed for consumers, this facility is becoming increasingly popular in the B2B space. More and more businesses are using BNPL to pay for everything from office supplies to marketing services. This new payment option is giving SMEs the flexibility they need to grow. With zero per cent EMI schemes, small businesses can make large purchases without putting any strain on their cash flow.
Small businesses are the backbone of the Indian economy, and play a pivotal role in the country’s growth story. They form an integral part of the unorganised sector, contributing 30% of India’s GDP.
How B2B Buy Now Pay Later is Bringing Massive Transformation in SMEs
While big businesses can avail of loans from banks and financial institutions, small businesses find it challenging to get financing at affordable rates. This is where B2B buy now pay later comes in. Here is how the B2B buy now pay later is transforming the SME landscape in India:
1. Easy Access To Working Capital
The biggest challenge for SMEs is access to working capital. They often have to resort to personal savings or take out high-interest loans to finance their business operations. B2B buy now pay later provides them with an easy and affordable way to get working capital.
Also, they can use this facility to buy raw materials or finance inventory and pay later in EMIs. This gives them much-needed financial support and helps them save on interest payments. The unrestricted access to working capital encourages them to invest more in their business and drives growth.
2. Improves Sellers’ Average Order Values
Earlier, small businesses could only offer their products and services on a cash or credit basis. However, with BNPL in place, they can now offer their customers the option to pay later. The seller gets paid upfront while the customer pays in instalments.
This not only helps sellers increase their average order value but also improves customer satisfaction as they are not required to pay the full amount upfront. As a result, small businesses can win more customers and grow their business.
3. Cost-Effective Model
The traditional lending model is quite expensive for small businesses as they have to pay high-interest rates. On the other hand, B2B buy now pay later is a cost-effective financing solution as it offers zero per cent EMI schemes.
Moreover, missed or late payments with credit cards can attract huge penalties, further increasing the cost. In contrast, BNPL providers only charge a nominal fee on late payments. This makes it an affordable and viable option for small businesses.
4. Helps Businesses Go Digital
Since the COVID-19 pandemic, there has been a significant increase in the number of businesses going online. According to Goldman Sachs, consumer demand will propel the Indian e-commerce economy to a $99 billion market by 2024. B2B buy now pay later is helping small businesses make this transition by financing their e-commerce operations.
From website development to online marketing, small businesses can use BNPL to pay for all their digital needs and grow their online presence. This will not only help them reach out to a wider audience but also tap into new markets and generate more revenue.
What’s Next for B2B Buy Now Pay Later
The B2B buy now pay later market in India is still nascent. However, with the growth of e-commerce and the rise of small businesses, it is expected to grow exponentially in the coming years. Regulators and the government are working hard to set up the proper infrastructure for recovering late payments.
The increasing awareness about BNPL among small businesses is expected to drive the growth of this market in India. In the coming years, we can expect to see more small businesses using B2B buy now, pay later to finance their operations and unlock growth.
B2B buy now pay later plan is a game-changer for SMEs in India. It is unlocking growth by providing much-needed working capital, which in turn is driving up revenue and profits. By making it easier for SMEs to do business, BNPL is fostering an environment of entrepreneurship and innovation, benefiting the whole economy.
If you are a small business looking to stream your overall lending procedure. Use Finezza, a cloud-based lending solution that will help you manage credit applications and smoothes the entire KYC process for easy onboarding of your customers.
Contact now to implement a customer-centric lending solution for your business financing needs!
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