You may have heard or even used the “Buy Now, Pay Later” option while shopping online. Some platforms, such as LazyPay and Simpl, among others, have made it easy to buy what you want without having to pay immediately. But what if someone told you that this same concept is revolutionizing the B2B world now?

So the era of Buy Now, Pay Later BNPL for B2B is here. It is a strong form of embedded finance that solves the most critical challenge for SMEs, i.e., managing working capital.

For a long time, SMEs have been caught up in a cycle of buying raw materials to fulfill orders, but at the same time, their capital is tied up in unpaid invoices. This crunch in cash flow stifles growth, restricts purchasing power, and strains supplier relationships. B2B BNPL is the ultimate solution.

What exactly is B2B BNPL?

In layman’s language, B2B BNPL is a finance model that allows a business (the buyer) to purchase goods from a supplier and pay for them later, typically within 30, 60, or 90 days, without any interest or additional costs. However, the supplier gets the payment instantly. This is, in fact, a seamless, pre-approved digital line of credit primarily for business purchases.

So, how does it work?

• The SME needs to purchase material from the distributor
• At the checkout, they choose “Pay later,” which is offered by the distributor platform
• Then the distributor gets full payment instantly from the BNPL provider
• SME repays the amount to the BNPL provider after the credit period, which may be 30/60/90 days

Why is B2B BNPL a Game-Changer for Indian SMEs?

Well, BNPL is surely a game-changer for the SMEs. Here are the reasons-

The biggest benefit is that it supercharges the working capital. When the payments are deferred for your business purchases, you get immediate cash freed up. This can later be used for operational costs, such as marketing, purchasing new equipment, and payroll, ensuring smooth operations without any liquidity issues.

When you get the ability to pay later, you can place bigger orders with the suppliers and distributors. Bulk purchases come with significant volume discounts, thereby directly improving profit margins. This means you won’t miss out on deals due to a lack of funds.

As you can pay suppliers immediately via a BNPL provider, you also become a preferred customer. This leads to priority, better pricing, and flexible terms in the future.

Gone are the times when you had to wait for lengthy paperwork at banks and waiting for loan approvals. B2B BNPL is directly integrated in the e-commerce or procurement platform that you are already using. It is user-friendly, paperless, and fast.

The Secret: How Fintechs Like Power B2B BNPL

You may be wondering as if so is funding this? The easy experience for the buyer and supplier is brought by solid financial services and technology that the Fintech specializes in. The two main engines that work behind a successful BNPL program include:

1. Invoice Discounting

• When the distributor or supplier sells products on credit, they generate the invoice. Rather than waiting it to get paid, they can discount the invoice with Fintech companies and get up to 90% of the value instantly. This is what happens in the BNPL model.
• The distributor sells to SME and creates the invoice with 60 days term
• Then they instantly sell the invoice to Fintech and get paid in return
• Fintech holds the invoice and takes payment from SME at the end of the credit period

Thus the process ensures that the cash flow is uninterrupted.

2. Supply Chain Finance

Then this is the other engine in which the buyer (SME)’s creditworthiness is used for early payments for the suppliers.

• SME purchases goods and approves the invoice of the supplier
• Fintech, leveraging SMEs credit pays the supplier instantly
• SME pays the Fintech on the actual (original) due date, which may be 60 days later

This is indeed a solid tool for the SMEs to provide the suppliers with immediate payments without affecting the cash reserves, thus strengthening their supply chain.

Is Your Business Ready for B2B BNPL model?

The shift to on-demand, embedded finance is not just a trend; it is, in fact, the future. Whether you are a distributor looking to provide flexible payment conditions to get more SME clients or an SME looking to unlock growth, it is time to act.

How Finocircle Can Help You Implement B2B BNPL

Finocircle helps you to be at the forefront of this revolution in the finance sector. They provide the much-needed assistance that SMEs and suppliers need to make B2B BNPL possible.

For SMEs

Get access to flexible working capital through Supply chain finance programs. You can use your creditworthiness with your suppliers to get favorable payment terms, which further ensure that you don’t miss any chance for a growth opportunity.

For distributors/suppliers

Finocircle also offers easy invoice discounting solutions, integrating them seamlessly with your sales platform. The option of “Buy now, pay later” is offered to SME customers, and you get paid immediately, thereby accelerating your cash cycle.

So, don’t let lack of cash flow dictate your growth. Embrace embedded finance and see the difference. Are you ready to explore B2B BNPL model and it can transform your business? Contact the team at Finocircle.in to discuss the various solutions tailored to your growth and success.