Why do B2B sales of “Buy it Now and Pay Later” fuel the expansion of SMEs?
With the help of buy-now-pay-later schemes, SMEs can get the funds they need to grow their businesses without taking on too much debt. These schemes allow businesses to spread out their payments over a period of time, making it easier for them to manage their cash flow. This is a great option for businesses that are just starting out and don’t have the credit history needed to get a loan from a traditional bank. So if you’re an SME looking for financing, be sure to explore, buy it now and pay later schemes as an option. They can help you grow your business without putting yourself into too much debt.
The lack of affordable credit for micro, small, and medium enterprises (MSMEs) is a major issue in India. This is especially true in the current global COVID-19 environment. However, BNPL services are growing quickly and offer MSMEs some attractive financing options. While most BNPL services are aimed at consumers, there are a few good B2B BNPL options available. These services can help MSMEs close the credit gap and grow their businesses.
According to a report released in June’19 by the RBI-affiliated U. K. Sinha Committee, the credit deficit in the sector of micro, small, and medium-sized firms is projected to be worth Rs 25.8 trillion. The worldwide Covid-19 pandemic does nothing but widen these financial gaps. The BNPL payment mechanism, however, opened the door for a more practical means to close the difference. The BNPL is swiftly growing with strong financial products for SMEs, despite the fact that the majority of its products are only available to B2C users. As shown here.
What Does “Buy it Now and Pay Later” Mean in B-to-B?
Small firms can purchase from manufacturers, wholesalers, or B- to -B marketplaces with the use of short-term finance. Financial performance typically serves as the basis for this kind of borrowing. Capital purchases can be less efficient, so businesses with tight cash flows and limited working capital may benefit from this type of product.
BNPL is a payment method where buyers can pay for items in small amounts over time. This enhances the average order value and sales conversions for merchants. BNPL bases its decisions about consumer loans on the company‘s own data on customer behaviour and available banking data. Open- and closed-loop models do this. A closed- loop approach would assess interactions with a vendor, wholesaler, or B- to -B marketplace to assess the likelihood of default. The creditworthiness and ability to pay of the company are evaluated using an open-loop approach.
The BNPL payment model is beneficial for retailers with razor-thin margins who can’t afford to be delayed even one day in their billing cycle. This product allows buyers, sellers, and underwriters to win deals, which is important for small businesses that need to grow without straining their cash flow. 0% EMI plans let small businesses buy big items without stressing their finances.
How are SMEs being significantly transformed by B2B “Buy it Now and Pay Later”?
Small businesses are essential to the Indian economy, accounting for 30% of its GDP. However, these businesses often have trouble getting affordable loans from banks and other financial institutions. This is where “buy it now and pay later” comes in. B2B services are helping Indian SMEs by providing them with more affordable financing options. This allows these businesses to grow and contribute even more to the Indian economy.
- Accessibility To Working Capital Is Simple- SME’s have a major need for working capital in order to grow their businesses. The B2B Buy It Now and Pay Later services make it simple and inexpensive for them to obtain the working capital they require. This allows them to buy raw materials or stock and pay for it later, which gives them the money they need and saves them interest. Working capital makes it easier for SMEs to invest in their businesses, which helps them grow.
- Cost-effective business strategy- Small businesses often have to pay high interest rates when borrowing money. However, with B2B buy it now and pay later financing, they can enjoy 0% EMI plans and avoid costly late payment fees. This makes it more affordable for small businesses to get the funding they need and helps them stay in good financial standing.
- Increases average order values for vendors- Offering customers the option to pay later can help small businesses increase their average order value. Customers are delighted since they do not have to spend the entire amount altogether when purchasers pay in full the seller receives payment right away, which increases the vendor’s average order amount. This can help small businesses gain new customers and expand their business.
- Encourages businesses to go digital- Since the COVID-19 pandemic, businesses have increasingly moved their operations online. B2B “buy it now and pay later”(BNPL) services assist small businesses in making this transition and expanding their ecommerce presence. This includes making and promoting a website, which can help them reach more customers and make more money.
- Improved Conversion Rates- Offering credit at checkout can make sales easier for B2B customers and boost conversion rates. The user interface is prioritised to provide an easy user journey that only takes a few minutes. Surveys show that user experience is important to B2B customers.
Businesses that might otherwise lack access to working capital and procurement financing now have an equal opportunity thanks to the B2B BNPL, allowing them to concentrate more on other facets of their operations. With its transaction- and cash flow-based underwriting for small enterprises, the solution is simple to implement. The B2B purchase now and pay it later business model has altered the rules for SMEs in India. It supports growth by providing essential operating capital, which in turn raises the profits and revenue. Offering credit at checkout can make sales easier for B2B customers and boost conversion rates. The user interface is prioritised to provide an easy user journey that only takes a few minutes. Surveys show that user experience is important to B2B customers.
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