The phrase “Buy Now, Pay Later” (BNPL) might conjure images of young people buying clothes and cosmetics online. Still, the truth is that this payment method is becoming increasingly popular with businesses too. A recent study showed that over a third of small businesses in the United States had used BNPL in the past year. So, what exactly is BNPL? And how can it benefit your business? Read on to find out.
What Is Buy Now, Pay Later?
Simply put, BNPL is a type of financing that allows businesses to purchase goods and services now and pay for them later. The terms of each BNPL agreement will vary, but businesses usually have between 2 and 6 months to pay off their debt. There are a few different BNPL providers, but the two most common are Afterpay and Affirm.
How Does Buy Now, Pay Later Work For Businesses?
The way BNPL works for businesses is similar to how it works for consumers. Businesses sign up for an account with a provider, select the goods or services they want to purchase, and then receive them immediately. The provider pays the supplier upfront and then bills the business later. Once the bill arrives, the business has a set period to pay it off. They will incur additional fees if they do not pay it off within that time.
What Are The Benefits Of Buy Now, Pay Later For Businesses?
There are a few key benefits of using BNPL for businesses.
- It can help you free up working capital to reinvest in other business areas.
- BNPL can help you build your business credit score if you make your payments on time (like any other loan).
- BNPL can help you take advantage of early payment discounts from suppliers (since you won’t be paying for your goods until after you’ve received them).
- It protects sellers against risk because they are guaranteed to get paid (unlike when businesses extend credit to customers, which can be risky).
- Reduces cart abandonment rates as customers don’t have to worry about coming up with the full amount of money at the time of purchase.
What Are The Risks Of BNPL For Businesses?
Of course, like with any financing, there are also some risks associated with BNPL. The most significant risk is that you can pay more for your goods if you don’t pay off your debt within the specified time frame. Additionally, if you use BNPL frequently, it could lead to cash flow issues down the line.
How To Decide If Buy Now, Pay Later Is Right For Your Business
Whether or not BNPL is right for your business will depend on a few factors:
- You’ll need to consider whether you can afford the additional fees associated with this type of financing.
- You’ll need to consider whether you’re comfortable with the risks.
- You’ll need to decide if the benefits of BNPL are worth it for your business.
If you’re looking for a way to free up some working capital, build your business credit score, and take advantage of early payment discounts, then BNPL might be a good option. Just be sure to carefully weigh the risks and benefits before deciding.
Popular BNPL Providers For Businesses
There are a few different BNPL providers that cater to businesses.
Biller is a provider that offers Buy Now, Pay Later for businesses of all sizes. They have flexible repayment terms and minimize your admin.
Afterpay is a popular BNPL provider that offers payment plans for businesses of all sizes. They have shorter repayment terms than most other providers (2-8 weeks) but charge late fees.
Afterpay is a BNPL provider that offers businesses up to $150,000 in financing for 4 to 6 months.
Affirm is another popular BNPL provider that offers businesses up to $100,000 in financing for 3, 6, or 12 months.
If you’re looking for a way to free up working capital or take advantage of early payment discounts from suppliers, then BNPL might be right for your business. Make sure to research and choose a reputable provider before signing up. And finally, always be mindful of the risks involved to avoid any financial difficulties down the road.
Buy Now, Pay Later is growing in popularity because it offers tangible benefits to businesses who use it. Before deciding if this payment option is right for your company, carefully weigh the risks and rewards. If you decide that BNPL is the right choice for you, there are many great providers. We hope this article has helped you understand how Buy Now, Pay Later works and what to consider before using it for your business.
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