BNPL for B2B?
Is that a thing?
I saw a story in Techcrunch about BNPL for B2B, obviously this had to be my next post for B2B Buzz. What shocked me the most was that there is more than one Fintech in this category. It seems to me this is simply accounts receivable or trade credit, but let’s dig in and see what BNPL for B2B is all about.
The headline that prompted me to write this blog post:
“Affirm spinout Resolve raises $60M for its B2B ‘buy now, pay later’ platform” Techcrunch Online May 25, 2021
For clarification:
“The main difference between invoice factoring vs. invoice financing is who collects on the business’s unpaid invoices. In invoice financing, the customer retains full control of collections. In invoice factoring, the factoring company purchases the unpaid invoices and takes over collections.” Fundera
Fundera has a good explanation of the difference here with a lot more detail. https://tinyurl.com/7eu5cyff
Fundera mentions our friends at Bluevine and Fundbox as good providers of Invoice Factoring and lines of credit.
To be clear the main goal of any of these platforms or solutions regardless of the size of business is: Manage Cashflow.
As you know Cashflow is the lifeblood of any business. You have to be able to pay employees, buy raw materials or goods and that requires collecting on your invoices in a timely manner. The pandemic drove this point home as DSO (Days Sales Outstanding) increased for many businesses. This is a key metric that any good controller or CFO is on top of.
From the Techcrunch article: “Unlike Affirm — which is more focused on the consumer — Resolve is exclusively focused on business-to-business billing by automating the process of billing and purchasing on credit.”
If it is truly about AUTOMATION then it starts to make a lot more sense.
Looking at another player in the BNPL for B2B space it begins to become clearer as they are focused on Merchants. https://tillit.ai/
“Tillit helps Merchants to maximise trade sales.”Tillit Website
The example they show is a company that sells bikes, so this company needs to order some bike parts to build their bikes, they do their sourcing online and then instead of paying directly for the parts, they use Tillit to finance the parts. Tillit is based in Oslo Norway and as many of you know the Nordics are good at B2B, Tradeshift being the best example.
The final example we will look at is also from Europe, Hokodo. I give them the most credit (pun intended) as they are intellectually honest that their solution is basically a SaaS Trade Credit platform. They even have an excellent blog post about Trade Credit: https://www.hokodo.co/blog/trade-credit-101-what-is-it
However they can’t resist using BNPL for their marketing as seen in the screen shot below from their website.
Hokodo offers:
- Credit Checks: “Real-time recommendations on which transactions can be offered on credit terms”
- Insurance: “Protection against credit and fraud risk, backed by Lloyd’s of London”
- Financing: “We arrange the financing so you get paid on delivery, while your customers pay later”
- Collections: “Chasing overdue payments while protecting your customer relationships”
That makes a lot of sense as most small business operators hate every single step of this process. The other aspect to Hokodo that is interesting is they break their target market down into 3 distinct segments: B2B Marketplaces, B2B Merchants and Invoice & Accounting platforms. The final segment they offer the payment insurance and the assurance that comes with the invoices you issue being backed.
So is BNPL for B2B a thing….
Yes I think it is, but to be clear trade credit, invoice financing and factoring have existed for decades. What BNPL is solving for is actually a point I have made many times in this blog. The biggest issues in the accounting and finance arena remain:
- Lack of automation
- Lack of data sharing
- Friction for everyone
If a BNPL for B2B solution addresses these issues and gets companies paid faster, then it will likely find traction. Much like any Fintech solution these BNPL for B2B will likely start with the most tech savvy businesses first. The BNPL B2B websites all talk about the ease of their API to get your data integrated quickly. The Invoice financing and factoring folks tend more towards “send us your invoices.” That could mean anything from an email to a fax to a giant envelope filled with invoices.
Hokodo certainly admits what I thought, which is they are a “SaaS Trade Credit platform.” But like Hokodo, Resolve and Tillit if I had started a working capital company this year and was fund raising and marketing, I would sure as hell call it BNPL for B2B too instead of a SaaS Trade Credit platform.
For my bank readers, please notice this is one more service that Fintechs are offering to YOUR customers that will erode the relationship you have with your SMB customers. Now is the time for you to shore up your bank offerings for SMB finance. It is not that hard and I would be happy to help you do it.
