How B2B BNPL Helps Businesses Optimize Working Capital

B2B BNPL gives businesses the flexibility to buy what they need now and pay for it over time. Learn how this consumer solution can help your business grow.
Written by:  Mark Saltarelli
Last Updated:  December 7, 2023
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Optimizing cash flow is a top priority for businesses, and it’s especially important during times of economic uncertainty. To meet this need, suppliers and lenders continually look for new and creative solutions. This might explain the rising popularity of business-to-business buy now, pay later (B2B BNPL) purchasing platforms — but BNPL offers benefits beyond easy credit access. 

Today we’ll cover the ways BNPL benefits both buyers and sellers in all types of markets, including: 

  • What is B2B BNPL?
  • How does B2B BNPL work?
  • Why does the market need B2B BNPL?
  • What are the benefits of B2B BNPL for buyers?
  • How can you decide if B2B BNPL purchases are the best choice?

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What is B2B buy now, pay later?

Business-to-business buy now, pay later is a payment option that allows businesses to purchase goods and services immediately with the option to pay over time using incremental digital payments. While the consumer market has seen a steady rise in BNPL platforms such as Affirm, Klarna, and Afterpay, B2B lending platforms have only recently begun answering the call for more flexible options.

Buying in the B2B space is often more complex than undertaking a simple consumer transaction in the B2C (business-to-consumer) market. For this reason, B2B BNLP options have lagged behind more widely available B2C extended-pay options. Software as a service (SaaS) and Fintech platforms are leveling the playing field for credit processors interested in providing extended installments, allowing businesses to take advantage of the same benefits as individual consumers.

How does BNPL for B2B work?

BNPL is essentially a form of trade credit. Where traditional, invoice-based net terms payments provide 30, 45, or 60 days of runway before repayment is due in full, BNPL allows a company to spread out the cost of larger transactions over a set period without exorbitant fees. This payment option is especially beneficial for small businesses that might not have the upfront resources to make large purchases. It’s also popular among mid-size companies that need more flexibility in managing cash flows.

Steps in a typical BNPL transaction

Buying with BNPL in the B2B setting is much the same as consumer financing. Businesses shop, apply, get approved, and receive their supplies. The approval process usually takes only a few minutes and follows these steps:

  1. Customers shop for goods needed to run their business.
  2. At checkout, they select BNPL.
  3. They provide identifying information, such as business name, address, contact info, etc. The BNPL provider runs a quick, electronic background check and credit checks to determine buying amounts, repayment terms, and fees (if any). 
  4. Upon approval, the customer signs a credit agreement outlining the terms and conditions of the BNPL payments.
  5. The merchant receives a confirmation for the approved transaction and a remittance schedule outlining when payments are due. 
  6. The merchant fulfills the order and delivers goods to the customer. 
  7. Payments begin on schedule and continue until the balance is paid in full. This renders the customer in good standing and increases the likelihood of accessing additional credit for future needs. 
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B2B BNPL with Order.co Financial Offerings

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Why does the market need BNPL?

Traditional invoice-based payment processes for B2B sellers often come with potential fees, strict deadlines, and limited flexibility. Companies must have the resources to pay the entire amount immediately in order to access goods and services, creating a potential barrier for small businesses that may not have the necessary capital. This can lead to missed opportunities or slow growth, as small companies cannot take full advantage of products that could help them succeed. 

Sellers also face challenges with traditional B2B transactions. The invoice model leaves them vulnerable to non-payment when selling goods on credit. As with any loan, there is no guarantee the buyer will pay in full or even make payments on time. This means sellers may bear the cost of unpaid invoices and absorb the loss, preventing them from reinvesting in their business. If a buyer defaults on an invoice, they might face legal fees associated with collecting the debt. The risk of non-payment can be especially concerning for small businesses that don’t have large cash reserves and thus rely on timely payment for their own liquidity. Non-payment risk has increased in recent years and is likely to continue rising due to continued inflation and tight credit conditions.

BNPL platforms offer B2B buyers the ability to get what they need quickly and drive production. Likewise, they protect sellers from potential invoice default by providing a secure platform for businesses and suppliers to complete transactions. Suppliers know they’ll be paid in full before transferring goods, and they stay protected against non-payment even if a business defaults. 

What are the benefits of a BNPL solution for buyers?

BNPL makes for safe and fast transactions for both parties in a deal. However, the perks of purchasing with a B2B buy now, pay later model go well beyond those benefits, including:

Easier approval: Setting up a credit account through a traditional invoice method can be time-consuming. A credit application, buyer info, and supporting documentation are often required before you can make a purchase. There is usually a lag after submitting a purchase request, meaning buyers must wait to see if their purchase will be approved.

With B2B BNPL, sellers have a guarantee of full payment upfront. Default risk is transferred to a third party, making it much easier for vendors to approve and fulfill orders quickly.

Cash flow management: BNPL platforms allow businesses to manage cash flow with smaller payments over time rather than upfront. This allows businesses to make the most of sales revenue while avoiding risk. 

Faster business growth: BNPL platforms let buyers take advantage of fast fulfillment — a huge advantage for small businesses and startups that don’t have large cash reserves. Using BNPL to access the capital they need quickly, businesses can accelerate their growth, invest in new products, expand distribution channels, or increase marketing efforts. Improved cash flow also helps businesses stay solvent and maximize profitability by limiting late payments and related fees due to invoice default. 

Secure payment: BNPL gives buyers and sellers a secure way to complete transactions, protecting both parties from risk. It holds buyers accountable for paying their balance in a timely manner. Sellers have peace of mind knowing they’ll receive payment for their goods before fulfillment. This security makes BNPL an attractive option for both parties in B2B payments.

Fewer invoices: BNPL may reduce the number of invoices businesses have to process and the time it takes to do so. Instead of managing multiple individual invoices and terms, businesses use BNPL and manage regular payments through the platform. This reduces paperwork, which translates into more efficient payment management.

Budget planning: Estimating upcoming budgets can be daunting with traditional invoicing, as businesses must track multiple payables. BNPL gives businesses a more predictable view of their upcoming budgets. BNPL allows buyers to select flexible payment terms that suit them best, enabling them to allocate funds accordingly. This helps small businesses make informed decisions about future investments.

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B2B BNPL with Order.co Financial Offerings

Unlock capital advances of up to $500k, net terms for all vendors and virtual cards with Order.co, an easy and affordable partner for your business’s growth.

Access Financing

How do you know if BNPL purchasing is good for your business?

There are a few things to consider when weighing the benefits of a purchase using extended credit terms like BNPL. Evaluate the following factors when deciding if BNPL is the right strategy for getting the most value out of an upcoming purchase:

Examine your cash reserves: How much cash does your business have in the bank for purchases? If your cash flow statement could benefit from more stability, BNPL could be a good choice. It allows you to make the most of your current cash reserve by spreading out payments over a longer period. It avoids the feast-or-famine cash cycle that keeps some businesses from growing efficiently. Carefully consider whether the monthly payment and terms make the purchase affordable as part of your other purchasing and loan obligations.

Think about upcoming purchases: What large purchases does the business have on the horizon? BNPL can help you spread out the cost of upcoming purchases such as new equipment, software, or inventory. It gives your business more flexibility when preparing for a major investment. If you have one or more large purchases to make in the near future, using BNPL to pay for them might stabilize the payments and optimize cash utilization. 

Consider any fees: BNPL fees vary between providers, so factor this into the research process. Look for plans with no setup fees and low or flexible payments. Be sure to compare the length of repayment periods and interest rates, if applicable. Consider additional charges that may apply, such as late payment penalties or pre-payment fees. Lastly, determine any tax implications associated with using BNPL for purchases. With these factors in mind, you can make an informed decision about BNPL for your business versus traditional trade credit.

Look at pricing benchmarks: When considering a buy now, pay later purchase with a vendor, ensure the items' pricing still makes BNPL a good total value. Conduct price benchmarking for your most frequently used items. Consider whether the savings through another vendor might outweigh the benefit of spreading out payments.

How Order.co balances cash flow and growth

Order.co brings together a robust, modern spend efficiency platform and innovative working capital solutions for businesses of all sizes. Using Order.co Financial Offerings, buyers can access their preferred vendors, dynamic spend and catalog features, and up to $500,000 to purchase necessary goods and supplies. Order.co Financial Offerings include

  • Flexible payment schedules for better short-term cash management 
  • Fast, paperwork-free applications that take less than a week for approval
  • No surprise fees or delays in purchasing the items your business needs to grow 

To grow your business with best-in-class access, features, and funding, schedule a demo of Order.co today.

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