What is B2B Buy Now, Pay Later?

Published 26th July, 2022
Last updated 25th July, 2023

What is B2B BNPL?

Offering trade credit for B2B transactions has long been a difficult terrain to navigate, complicated by lengthy admin, credit risk, and tedious customer onboarding. These are typical challenges you won’t often in find B2C given the less complex buying process. It also explains, in part, why B2B BNPL has lagged behind for so long. 

However, huge technological strides have been made in recent years that finally bring the BNPL model to B2B. Being described as “fintech’s answer to the age-old concept of invoice financing”, BNPL has the potential to completely change the way businesses buy and sell to one another.

Table of contents

1. How does B2B Buy Now, Pay Later work?
2. Why the rise in B2B BNPL?
3. The benefits of B2B Buy Now, Pay Later

How does B2B Buy Now, Pay Later work?

BNPL has actually been a form of payment for some time in business, known as net terms, trade credit, or purchasing on invoice. Typically the buyer pays for their goods or services over 30, 60, or 90 days. Purchasing on invoice essentially allows the buyer to take a line of credit from the seller and pay at a later date.

There are, however, inherent problems baked into this type of payment, particularly for the seller. The seller takes on the credit risk whilst being forced to wait until the end of the invoice term, leading to issues with cash flow.

Additionally, managing the admin and dealing with customer onboarding can be a tedious process that can take days (or even weeks) to complete. 

To alleviate these problems, BNPL for business offers a simpler way of offering your business customers net terms with some considerable benefits including:

• Increased conversions rates
• Drastically reduced admin time
• Offset credit and fraud risk
• Improved cash flow

Below you can see the simple stages involved in how we offer our customers B2B Buy Now, Pay Later here at Two:

Why the rise in B2B BNPL?

While COVID-19 put the world on pause for 2 years, positive advances in the B2B space emerged. The BNPL B2C model started making its way over to B2B and now, more and more business customers are expecting an experience akin to their B2C purchases. 

This can be partly explained by how familiar B2B buyers are with financial technology. Given 73% of all professional B2B purchasing decisions are made by millennials, the increasing assumption is that B2B companies will offer the same seamless purchasing experience as B2C.

For example, a study by McKinsey found that 96% of B2B buyers might make a purchase in a fully end-to-end, digital self-serve model.

Additionally, more and more sellers are taking their businesses online. A further McKinsey study found that business buyers favour online purchasing due to its convenience and ease, as in-person or phone transactions are no longer efficient in terms of time.

These shifts in the way sellers and buyers interact have greatly influenced the way B2B payments work.

The benefits of B2B Buy Now, Pay Later

At a surface level, you’d be forgiven for thinking trade credit and B2B BNPL are the same thing. There are a lot of similarities, but it’s the differences that make B2B BNPL such a revolutionary solution.

B2B BNPL solves many of the pain-points involved with offering trade credit. Simply put, it offers a way for sellers to offer trade credit in a much safer, simpler, and sophisticated way.

1. Improve cashflow

One of the drawbacks of traditional trade credit is that the seller is forced to wait until the end of the invoice term until they receive payment. This can lead to a whole host of cash flow problems for the seller that prevents them from growing their business and expanding. 

To mitigate this, it’s common to resort to invoice factoring, invoice discounting, or bank loans - none of which are an optimal way of growing. But the nature of BNPL B2B means that merchants are paid upfront for their invoices, often with help from financial institutes the B2B payment platforms work with.

Any B2B payment platform worth its salt will also reconcile payments. That means saying goodbye to chasing late payments on a daily basis.

2. Removes credit and fraud risk

Working with third parties to run credit and ID checks is a necessity if you manage invoice purchases in-house. However, once a buyer is approved, there’s still risk involved. What happens if the buyer doesn’t pay? And how do you know if the ID verification or credit checking process was comprehensive enough? 

Merchants operating with little fraud knowledge are often left exposed, sometimes with dire consequences. BNPL B2B removes that risk. B2B payment providers perform comprehensive credit and fraud checks then and there for an uninterrupted buying experience.

For the seller, that means being able to offer net terms without the stress of fraudulent orders.

3. Cut admin time

Many merchants are simply unable to tap into the demand of purchases by invoice because it requires too much manual work. Managing an invoice payment solution in-house requires specialist staff to organise invoices and stay on top of payments. 

But with BNPL B2B, merchants can simplify operations across multiple departments and save time, making it super easy to stay organised and save multiple hours a week in manual work.

In fact, this talent sourcing company saved 15 hours of manual work a week and improved cash flow using Two!

4. Increases average order value and conversion rates

Buyers who don’t use credit cards have to float their working capital by fronting their expenses to make purchases. And the companies who do use credit cards often run into card limits that prevent them from buying what they need.

But BNPL B2B makes purchases seamless. Buyers no longer need to chase down that one employee with a corporate card or expense business purchases on their own account. This ultimately allows buyers to place larger orders without running into cash flow problems while increase B2B sales for the seller.

For example, our merchants typically see a 60% increase in average order value. That’s certainly not the limit though! The same can be said for conversion rates, with our merchants seeing a 20% uplift after offering BNPL B2B.

Take Purple Planet Packaging, for example.

Once they started using Two’s E-Commerce Checkout solution, they noticed their customers were placing larger orders. This led to a 400% increase in average order value!

5. Increases customer retention

The issue of a complicated checkout experience for B2B buyers shouldn’t be understated. In fact, 77% of B2B buyers say their latest purchase was either difficult or very complex. 

Loaded with useful features for this very reason, BNPL B2B solves the all too familiar challenges of merchants who want to offer their customers net terms. Offering a BNPL B2B solution that works for your customer ensures (or at the very least increases) your chances of keeping them loyal.

What industries benefit most from B2B BNPL?

The truth is, any industry that features trade credit in one form or another can benefit from B2B BNPL! But to dive a little deeper, let's look at some use cases to understand how B2B BNPL can help.

E-Commerce

B2C e-commerce is a $3.67 trillion global industry showing no signs of slowing down. But in reality, the B2C e-commerce market dwarfed by B2B, predicted to be worth a whopping $17.9 trillion, nearly 5 times the size.

As a result of this massive difference, around 65% of B2B companies now offer e-commerce capabilities. And the fact is, 95% of B2B customers prefer not to pay upfront.

B2B e-commerce companies need a fast, reliable, and frictionless way of selling to the buyers with online trade credit capabilities. Offering such solutions can help with everything from B2B sales and reduced admin, to offsetting credit risk and cash flow fixes.

For example, SMEs in particular are facing increased pressure from cash flow issues and unpaid invoices. B2B BNPL offers sellers a way alleviate the financial burden of offering trade credit by providing upfront payments.

Checkout the video below to learn more about how e-commerce can benefit from using Two:

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Are you a B2B E-Commerce Manager? Read our recent article Boosting B2B Sales in E-Commerce: Unleashing the power of BNPL.

Construction

Trade credit is an essential tool in the construction industry. It enables suppliers to extend credit to their customers, allowing them to purchase the necessary materials and equipment without paying upfront. However, offering payment terms can be risky and comes with its own set of problems. Late payments, damaged reputations, and credit risk can have a disastrous impact on both the supplier and buyer.

The process of offering trade credit in the construction industry will vary, but in its simplest form it looks something like this:

Assessment: The construction company evaluates the creditworthiness of the contractor, considering factors like financial stability, payment history, references, and legal obligations.

Credit Limit: Based on the evaluation, the construction company determines the maximum credit amount they are willing to extend to the contractor.

Terms: The construction company establishes specific payment terms and conditions, including the payment period (e.g., 30 days, 60 days).

Payment: The contractor receives goods or services on credit and is expected to make payments within the specified payment period. The construction company sends invoices and follows up on collections if needed.

This is a lengthy process that until now, has been one of the only viable options for suppliers.

The fact is, the construction industry is one of the worst hit for late payments:

• In 2022, more than half of all invoices sent to construction firms were paid late.
• The impact of late payments becomes glaringly obvious when you consider that a quarter of SMEs see survival as their main goal in 2023.
• Industries hit the hardest with late payment issues (construction, financial services, and IT) spend the most amount of time chasing them with an average 7 hours a week spent managing accounts receivable tasks.
• In the US, late payments cost the construction industry $208B last year.
• ‍23 UK construction firms went into administration in December 2022 alone.

Using Two however, construction suppliers can improve cash flow, perform instant credit decisions, provide a frictionless onboarding experience and boost their B2B sales.

Read more about trade credit in construction.

Wholesale

The wholesale industry relies on recurring customers. Businesses like restaurants, for example, often place multiple orders throughout the month to top up their inventory. But the process is time-consuming and creates endless paperwork.

B2B BNPL solutions like Two can be used in wholesale to simplify the entire process. Take REKKI for example, a happy customer of Two.

Throughout the month, restaurants place multiple orders with REKKI to replenish their stock. The industry standard payment type for these orders is on invoice. But the issue is that buyers end up with multiple invoices that need to be paid at different times.

REKKI used Two’s Trade Account and grouped invoice feature to allow buyers to purchase what they need throughout the month while receiving a single invoice for all purchases.

Learn more about how Two helped REKKI.

Given the wide range of benefits B2B BNPL has, the following industries can also see massive improvements in the way they offer trade credit:

• B2B Marketplaces
• Office supplies
• Travel
• SaaS
• HORECA

What B2B BNPL solutions are available?

Two offers a range of B2B payment solutions to make it easier than ever to offer integrated trade credit directly at the checkout and boost B2B sales.

E-Commerce Checkout

With support for some of the most popular E-Commerce platforms like WooCommerce, Magento, and CraftCMS, Two’s E-Commerce Checkout gets you up and running straight away. Or you can integrate directly with our API.

Two’s E-Commerce Checkout allows you to offer a frictionless checkout experience for your customers to increase B2B sales and conversion rates. And with a 90% acceptance rate, you can say goodbye to turning customers away. In fact, this apple reseller was rejecting 52% of their potential B2B customers before using Two.

Learn more.

Trade Account

Onboarding customers in the traditional way is manual and time-consuming. The long it takes to get them up and running, the higher the chances they’ll abandon their basket and choose a competitor.

Two’s Trade Account provides you with a frictionless customer-onboarding experience, integrated right into your sign up flow. Customers simply fill in their details, apply for credit, and checkout in 30 seconds. In fact, Trade Account users see an 18x increase in customer retention and 11x more orders per buyer!

Plus, true one-click purchasing makes buying from you a walk in the park. With features like Grouped Invoices, your customers can receive a single invoice per purchase or grouped into weekly, fortnightly, or monthly invoices to drastically reduce admin!

‍Learn more.

Order Creator

Omnichannel selling has become increasingly popular in B2B. In fact, B2B customers now regularly use ten or more channels to interact with suppliers. But can your field sales or tele-sales team offer instant trade credit as easily as your e-commerce store?

Two’s Order Creator makes it simple to offer invoice purchases to all B2B customers, because sales don’t just happen in one place. Capture offline sales, get paid upfront, and offset credit risk by harnessing the total power of Two for all B2B sales.

‍Learn more.

Instalments

Selling B2B rental services or subscription plans can be tough. In fact, only 3.8% of SaaS businesses offer annual plans as a result. Other than creating needless cash flow problems, this means B2B sales suffer.

Let your customers split payments for purchases over 3 to 24 months with Instalments. Boost B2B sales for rental services, subscription plans, and big-ticket items to drastically improve cash flow and increase B2B sales. All while Two handles the admin.

‍Learn more.

So, ready to take your business to the next level and offer a B2B payment solution that truly works? Speak to one of our experts today!