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Is ‘Buy Now, Pay Later’ a Good Scaling Solution for Businesses?

Buy Now, Pay Later (BNPL) is on the rise within business-to-business (B2B) transactions. BNPL is a highly regulated financial model that can facilitate more freedom for its users; businesses can spread the costs of purchases, growth, and internal investment instead of operating within the rigidity of the consumer financing model.

Confusion still lingers around aspects of the BNPL model and businesses often remain unsure if it can work as the right financing solution for them. This uncertainty largely stems due to ambiguity around the differences between BNPL transactions in business and consumer commerce.

What Is B2B BNPL?

B2B BNPL is fundamentally a form of online trade credit that offers businesses the opportunity to spread the cost of goods. Trade credit isn’t a new concept – in fact, it has existed since the beginning of commerce – but merchants and marketplaces operating online have been unable to utilise it effectively.

With the shift to e-commerce, B2B BNPL offers a potential solution to the problems faced by businesses when it comes to their payment processes, as this type of financial model facilitates flexibility for all parties involved in a transaction.

Although some online suppliers have been known to offer BNPL-like solutions off their own balance sheets, the most successful and versatile arrangements are typically offered in conjunction with a specialist B2B BNPL partner.

These providers take responsibility for financing each BNPL transaction, allowing both the suppliers and consumers to benefit in the long run; consumers are given more flexibility with ‘spreading the cost’ of payment, whilst suppliers are immediately paid for their goods.

What Are the Benefits of BNPL for Scaling Businesses?

Referring to scalability means embedding intrinsic flexibility within your business that enables growth and long-term success. The primary benefit of BNPL for suppliers is the power it offers – you can enhance customer service levels whilst increasing your turnover.

Providing customers the opportunity to spread the cost of their purchase results in a three-fold opportunity: the increase in sales, the increase in conversions, and the increase in customer loyalty.

This three-pronged vantage provides your business with higher value retention plus the potential for repeat spending. If a customer receives good service and favourable payment terms, you will stay within their trusted circle of suppliers the next time they’re in need of goods.

You may then also receive interest via word-of-mouth marketing – these loyal consumers are likely to recommend you to their friends and peers, building cost-effective brand loyalty.

The reason B2B BNPL can operate so successfully is that it benefits buyers. They gain the ability to defer payments for large purchases by 30, 60, or even 90 days which gives them power over their cash flow and instant access to the goods they need to grow their business.

What Are the Differences Between B2C and B2B BNPL?

Consumer point of sale (POS) financing has something of a negative reputation. However, it remains a popular choice amongst consumers as it helps those with low credit ratings or insufficient funds to access more expensive goods. However, this type of financing also goes hand in hand with high-interest rates and hidden fees, leading to consumer debt.

This is one of the key criticisms of B2C BNPL, but it is not reflective of the B2B BNPL model due to some key differences in the overall process.

Professional buyers are unlikely to have a problem with overspending as they have no reason to buy more than they need. Their aim is to minimise their Cost of Goods Sold (COGS), meaning the potential to fall into debt due to “pay later” schemes is largely diminished.

B2B agreements are also typically able to offer higher value credit lines at better terms. This helps sellers increase their turnover as well as makes it easier for the requisite goods to be purchased.

Over the course of the last year, businesses offering BNPL financing solutions have reported up to a 40% increase in conversion rates. This increase is beneficial to both buyers and sellers as scaling becomes far more workable once your business is operating with customer trust and approval.

When carried out correctly by working with a reputable B2B partner, BNPL provides a risk-free, secure, and flexible financing solution for both buyers and sellers. This solution is quick and easy to implement and enables fast decision-making. BNPL holds great potential to act as an effective scaling solution for businesses.

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