A Guide to B2B Buy Now Pay Later (BNPL)

Does this sound familiar? Your small business needs to make a big purchase, but your cash flow is doing the cha-cha (two steps forward, one step back). Or, maybe you’re a wholesale supplier who wishes there was an option to give customers a B2C payment experience instead of handing them a stack of loan paperwork.

Enter the rising star of B2B payment solutions — B2B Buy Now Pay Later (B2B BNPL). Borrowers can buy what they need right now without tedious loan applications, and merchants still get paid up front. Magic? Not quite, but pretty close.

For companies looking for ways to improve their cash flow and reduce payment friction, BNPL for businesses is ideal, and its popularity is soaring.

In this article, we’re looking at how B2B BNPL works, how it’s different from B2C BNPL, and the benefits and challenges for businesses adopting BNPL solutions. We’ll also show you how choosing the right BNPL provider can help B2B borrowers receive financing in seconds, with higher credit lines and longer terms, and little to no risk for merchants.

What is B2B Buy Now Pay Later (BNPL)?

Buy Now Pay Later for B2B (also known as business-to-business BNPL, or B2B BNPL for short) is a payment solution that allows B2B buyers to complete a transaction (for example, a large purchase to fit out a restaurant) with a postponement of the payment date. Buyers can select payment terms at checkout that suit their cash flow cycles.

The BNPL provider then pays the merchant for the product, while the buyer pays the BNPL provider within the net terms they agreed on at the point of sale.

Depending on the BNPL provider, this is usually a fee-free financing arrangement for buyers, with no interest owing on the loan if the buyer repays the borrowed amount within the agreed period. 

In practice, this means that the buyer only pays for the goods they purchased when the goods are received and not returned. If the full amount due is repaid on time, no interest will be charged.

BNPL has already become mainstream in the B2C (business-to-consumer) space, especially with platforms like Klarna and Afterpay, and its adoption in the B2B world is accelerating. 

Globally, B2B BNPL payments are expected to grow by 33.4% on an annual basis to reach US$199.2 billion in 2024. The gross merchandise value is predicted to increase from US$149.3 billion in 2023 to US$669.5 billion by 2029. 

Isn’t B2B BNPL just trade credit?

B2B BNPL is a type of trade credit, but unlike traditional trade credit as we know it, B2B BNPL gives customers streamlined, digital approvals right at the point of sale. This helps customers avoid frustrating application processes and lengthy waits for their loan funds.

Buyers can typically repay their BNPL loans in installments, with net terms from 30 to 90 days. Some B2B BNPL providers, like Credit Key, also offer extended repayment terms up to 12 months for greater flexibility.

This flexibility helps businesses better manage their cash flow, and make bigger and more frequent purchases, without tying up their available capital.

Why B2B BNPL is different from B2C BNPL

If you shop online, you’ll be familiar with B2C BNPL payment options like Afterpay and Klarna when you check out. These are services that allow consumers to make a purchase on the spot, and pay it back in installments.

B2C BNPL gives customers the advantage of buying items in their carts immediately instead of waiting until they have enough cash on hand. There is often no deposit needed, and interest-free periods might also be offered, which makes paying over time highly appealing for retail consumers.

This is good news for brands, as research shows that shoppers who use BNPL spend 6.42% more than other shoppers. However, the downside for consumers is that BNPL makes it very easy for them to impulse buy and overspend.

B2B BNPL operates in a similar way to B2C BNPL, but there are a few key differences: 

• Transaction size: B2B transactions are typically much larger than consumer purchases, and can range from $10,000 to $500,000.  For example, B2B buyers might need to buy expensive operating machinery or large amounts of stock to run their business.
  
  
• Risk management: Because of the larger loan amounts involved, B2B BNPL providers need to conduct more thorough credit checks and assess the financial health of buyers to manage payment risk.
  
  
• Payment terms: While B2C BNPL typically offers installment plans over a few weeks or months, B2B BNPL buyers can select extended terms up to 90 days or longer to align with their cash flow cycles.

Industries Adopting B2B BNPL

In 2024, more industries are adopting B2B BNPL solutions as a way to drive revenue and growth.

• Technology and SaaS: Companies in the tech hardware and software sectors are using BNPL to offer more flexible payment options for expensive software licenses and services.
  
  
• Manufacturing and wholesale: Manufacturers and distributors have turned to BNPL to help B2B customers make equipment purchases and bulk orders.
  
  
• Healthcare: Healthcare providers are increasingly using B2B BNPL for large equipment and service contracts, helping hospitals and other providers to manage increasingly tight budgets.

This shift towards B2B BNPL is primarily being driven by small and medium-sized businesses seeking accessible and cost-effective alternatives to traditional financing.

Benefits of B2B Buy Now Pay Later for Businesses

B2B BNPL offers advantages to both buyers and sellers, making it a game-changer for business transactions. 

As companies balance cash flow challenges and increasingly competitive markets, having flexible payment options at checkout can increase order frequency and value, and strengthen client relationships. 

Using BNPL can help businesses to:

Increase cash flow

For buyers, one of the most significant benefits of B2B BNPL is the ability to manage cash flow more effectively. The financial breathing room of extended net terms allows smaller businesses to allocate capital for other needs like inventory, payroll, or new growth opportunities.

This flexibility is especially important in industries with long sales cycles or seasonal revenue.

Reach new customers

For merchants, offering B2B BNPL is a solid strategy to attract more customers. Buyers are more likely to make larger purchases or place orders more frequently when they can pay over time.

Implementing a BNPL solution also helps merchants differentiate themselves in crowded markets, so they can attract and retain more customers. 

BNPL providers also have established marketing channels, such as partner directories and email marketing, which can provide additional opportunities for merchants to reach new buyers.

Reduce risk

Traditional credit arrangements often carry a high risk of late payments or defaults for merchants, but B2B BNPL providers take on the burden of assessing creditworthiness and managing collections, mitigating this risk. This enables suppliers to focus on growth rather than spending time chasing unpaid invoices.

With BNPL, merchants get paid up front and receive protection from repayment risk and fraud, whether or not the customer successfully repays their installments to the BNPL provider.

This typically means that BNPL providers take on 100% of the customer risk. If a customer does file a fraud-related dispute, the BNPL provider also takes on that risk and any associated costs.

Improve the B2B buyer experience

BNPL offers busy B2B customers a faster, more convenient way to access financing. Customers are only subject to soft credit checks, and there are no paper applications, fees, or lengthy processing times to deal with. Returning buyers can check out quickly, completing the payment flow with a few clicks.

Increase conversion and average order value

B2B customers are more likely to make big purchases if they can pay for the items over time, so BNPL helps to reduce the sticker shock of paying for expensive equipment or bulk orders. 

For example, it’s much less daunting for a small business to make four payments of $1,000 over 90 days than it is to make one $4,000 transaction with a credit card that you’re paying interest on every month.

Potential challenges of B2B Buy Now Pay Later

While B2B BNPL comes with a wide range of benefits, there can be a few challenges along the way for merchants. Choosing the wrong BNPL platform could undermine the effectiveness of BNPL solutions, and create more financial strain for merchants and buyers.

Payment risk

One of the primary risks associated with B2B BNPL is the potential for buyer fraud or default. Unlike B2C transactions where the amounts are typically small, B2B transactions can involve tens of thousands of dollars. This means that if a buyer is unable to meet their payment obligations, the financial impact for merchants can be serious.

To mitigate these risks, a good B2B BNPL provider will conduct a thorough credit assessment, and often offer credit insurance. It’s up to merchants to ensure they are working with a reputable provider that has a strong risk management practice in place. 

Integration with legacy systems

A common challenge for merchants is integrating BNPL solutions with their existing tech stacks. Established suppliers tend to have a complex web of on-premise and cloud software that might not easily integrate with BNPL. This can lead to delays in setup, errors in financial reporting, and a strain on internal resources.

When merchants are shopping around for a BNPL provider, they need to ask about implementation, and check whether everything will integrate easily with their existing software.

Regulatory and compliance concerns

As B2B BNPL’s popularity grows, so does the pressure to comply with regulators. The finance sector is heavily regulated, so complying with local and international regulations regarding credit, data protection, and financial transparency is critical. 

For example, in the European Union, new regulations on extended payment terms came into effect in 2024, requiring businesses offering BNPL to adhere to stricter transparency and reporting standards. 

Failure to comply with these regulations can result in hefty fines or legal action, so merchants using BNPL need to stay on their toes and keep up to date with changing requirements.

How B2B BNPL is shaping the future of business transactions

With its ability to improve financial flexibility for buyers, and streamline the financing process for sellers, B2B BNPL is set to play an increasingly important role in the future of business payments.

It’s also reshaping the dynamic between merchants and their customers. Traditionally, buyers had to deal with rigid payment terms, high interest rates, and strained relationships with suppliers if payments were late.

BNPL helps both sides to develop more positive, long-term partnerships, which can ultimately lead to increased loyalty and more repeat business. 

In the next few years, we can expect to see even more sophisticated B2B BNPL solutions, with better integration into financial platforms, enhanced credit risk assessments using AI, and more stringent compliance measures to meet global regulations. 

The adoption of B2B BNPL payments is expected to grow steadily over the coming years, with a compound annual growth rate (CAGR) of 27.4% projected between 2024 and 2029. 

B2B BNPL will likely become a standard payment option, particularly in industries like wholesale, manufacturing, and technology, which means early adopters will have an advantage.

Choosing the right B2B BNPL provider

Choosing the right B2B Buy Now Pay Later (BNPL) partner is the first step in ensuring the success of a BNPL strategy. 

With BNPL providers offering different features, fees, and payment terms, businesses need to evaluate everything carefully to find the right fit. Here are a few factors to consider when choosing a provider:

Fees and terms 

BNPL providers all have varying payment terms. Some charge a flat fee, while other providers take a percentage of each  transaction. 

You’ll also need to assess how flexible their payment terms are. For example, do they offer standard 30, 60, or 90 days, or do they offer extended payment terms up to 12 months? Making sure the payment terms align with sales cycles and cash flow is important for both merchants and borrowers.

Credit risk management

One of the biggest advantages of BNPL is that a good provider will assume all the risk of credit defaults. They will eliminate 100% of the risk, mitigate the risk of fraudulent customers, and handle the entire lending process. This means no more headaches over approvals, collections, or paperwork for merchants.

Customer experience

It goes without saying that creating an exceptional customer experience is important for B2B BNPL.

The process should be easy to understand and use for your customers, without complicated applications or delays. Most BNPL providers offer platforms where clients can easily apply for financing, get approved quickly, and manage their payment schedules online.

Successfully integrating B2B BNPL as a merchant

To successfully integrate BNPL, there are a few key steps merchants can take.

Before rolling out BNPL to all customers, merchants should consider a pilot program to test the solution with a select group of customers. This can help gauge demand, iron out any integration issues, and get a better understanding of how BNPL impacts their cash flow and operations.

Suppliers also need to make sure their customers understand the benefits of BNPL, and how they can take advantage of it. They should be given clear instructions about the application process, available payment terms, and any fees associated with using BNPL.

It’s important to monitor the performance of BNPL initiatives. Useful metrics to track include sales growth, customer retention, and payment default rates. This will help to optimize the BNPL strategy over time.

Why choose Credit Key as your B2B BNPL provider?

When it comes to B2B Buy Now Pay Later (BNPL) solutions, there are a growing number of providers out there to choose from. 

Here’s what makes Credit Key stand out:

Patented technology

We’re innovators in the Fintech space, holding two patents for our financial technology. These patents focus on a unique system for B2B credit facility provisioning and processing, designed from the ground up to improve the B2B lending experience for both merchants and customers, while keeping security top of mind.

The key benefits for our customers include lightweight integrations, real-time underwriting with faster approvals and higher credit limits, and more flexible payment options.

More flexible payment options

Credit Key offers flexible payment terms for B2B buyers, allowing them to pay over 30, 60, or 90 days, with interest-free options and extended payment plans up to 12 months. 

This flexibility is especially beneficial for smaller businesses looking to optimize their cash flow without incurring the high interest costs of credit cards or traditional loans. 

Credit Key integrates directly into ecommerce checkout processes, making it simple for buyers to click on a payment plan that fits their needs at the point of sale.

For merchants, Credit Key ensures that they receive full payment within 48 hours, eliminating 100% of credit risk and offering a hassle-free experience. This combination of flexibility for buyers and certainty for sellers makes Credit Key an ideal partner for businesses looking to scale.

Fast application and approvals

Unlike traditional credit options that require complicated approval processes, Credit Key offers a fast and simple credit check for buyers. Our platform uses advanced underwriting technology to evaluate buyers in real time, providing credit decisions in a matter of seconds.

Borrowers are eligible to receive an instant decision for a line of credit up to $50,000 with net 30 terms and payment options up to 12 months. 

We assume 100% of the risk and pay merchants within 48 hours. This speedy credit decision process helps reduce cart abandonment and improves the overall customer experience.

According to our research, merchants that offer Credit Key as a payment option see an average 20% lift in conversions, and a 29% increase in order frequency.

Simple integration and a user-friendly interface

Credit Key is designed to seamlessly integrate with a wide range of ecommerce platforms, making it accessible for businesses of all sizes. We support major platforms like Shopify, Magento, WooCommerce, and BigCommerce, allowing merchants to quickly add BNPL functionality without overhauling their existing systems.

The user-friendly dashboard makes it simple for suppliers to track sales, monitor buyer payments, and manage their BNPL offerings. For buyers, the process is equally intuitive, giving  them clear, up front payment terms and transparent fees.

Exceptional customer service and support

Credit Key is known for its exceptional customer service and support. We provide ongoing assistance to both buyers and suppliers, helping them navigate the ins and outs of their BNPL transactions. 

Our dedicated account management and support teams ensure that any issues are resolved quickly, and our platform is regularly updated to meet the evolving needs of users.

Transparent fees with no hidden costs

One of the reasons Credit Key stands out in the B2B BNPL market is our commitment to transparency. There are no hidden fees or confusing pricing models. Our merchant partners pay a simple flat fee for using the service, and buyers have access to clear, upfront terms regarding their payment schedule. 

This transparency helps build trust with our customers and partners, making it easier for more businesses to discover the advantages of BNPL without the fear of unexpected costs.

With fast credit approval, seamless integration, flexible terms, and an ongoing commitment to our customers, Credit Key is an ideal choice if you’re looking to offer or use B2B BNPL payments in your business. 

Calculate the ROI of Credit Key for your company, or contact our sales team to learn more.