‘Buy now, pay later’ platforms have changed life for shoppers and now small businesses will be courted with the same model.
Cloudfloat is preparing to soft launch its fintech product at the end of the month. The startup will pay business invoices directly and then small businesses will pay it back in instalments over periods up to 90 days.
As the push for shorter payment times intensifies, Habibullah says some companies are struggling to keep up.
Just as models like Afterpay let eager shoppers take home their items and pay them off in instalments, business customers want to draw this process out too, he says.
Consumer-focused buy now, pay later options are also seeing businesses use their offers to pay for assets.
“We’ve seen tradies use Openpay at Bunnings and other home improvement merchants to purchase goods to complete jobs. Commonly, tradies don’t get paid in full until the job is complete so using Openpay gives them access to funds that provides a cash flow solution to this challenge,” chief revenue officer of buy now, pay later startup Openpay, Dion Appel says.
ASX-listed Israeli fintech Splitit says businesses are also using its offer to extend credit card payments across multiple instalments, with “increasing demand from online merchants who want to use Splitit as a B2B solution”.
Market darling Afterpay has steadily been taking over shopping centres over the past few years and the concept of splitting shopping payments into bite-sized chunks is becoming more accepted.
While Afterpay is focused on lower value consumer goods, other fintech founders say there is plenty of growth still to come in the business-to-business space.
Marketlend, the peer-to-peer small business lender, launched a buy now, pay later product called UnLock at the end of last year.
Chief executive chief executive Leo Tyndall says in the first months of the system, Marketlend has given its small business clients limits totalling $8.5 million, so that they can have the fintech cover their bills and repay this in instalments later.
A range of businesses from publicly listed companies to craft breweries have expressed interest in the model, he says.
While fintechs insist the Afterpay model is in demand, some business owners are reluctant to take it up themselves.
Founder of lip balm maker Clean & Pure Mark Chapman says the idea of using a third party to spread out payments isn’t appealing.
“Running on debt for your ins and your outs, just makes you feel like you’re just not very stable,” he says.
Despite this, Chapman says the chase to maintain stable cash flow for the $1.5 million business can be “terrible”, particularly because many clients have standard payment terms of 60 days or more.
“We’re always chasing money. We have a lot of pressure on us,” he says.
Finance consultant and founder of Finance in Heels, Lisa Wilson, says many business clients see a need for fintech payments solutions, though warns they may include extra costs.
“I think there is a need for it, with the tightening of credit,” she says.