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More Fintechs are offering “Buy Now Pay Later” to Small Businesses

Fintechs offering short term finance for companies has been very popular with venture capital investors in recent months

‘Buy now, pay later’ can be controvesial. Some people love it as a handy challenger to credit cards others are concerned it encourages reckless spending and can contribute to problem debt.

In the past this has been a conversation in the consumer market, but now a new boom in interest is occurring in the world of funding SMEs with short-term loans much like the way Zilch, Affirm or Klarna do for shoppers. 

Funding Circle, the UK-listed fintech lender to SMEs is bullish on the market, seeing the opportunity to expand its product range away from offering term loans, which it has done for over a decade. 

Its CEO Lisa Jacobs  said that it would be scaling up its ‘Flexipay’ product materially in the second half of the year.

“This is the thing that I’m probably the most excited about that we’re doing. It moves us from being a term loan product, it builds on the tech platform that we’ve built, the customer advocacy that we’ve got, and the strong position that we’re in and moves us into being a multi-product and more frequent part of our customers lives,” Jacobs said. 

Funding Circle quietly conducted a beta trial of 850 existing business customers before expanding Flexipay to new customers in April.

“It’s gone down very well. We’ve had nearly £12m of credit limits approved and the engagement has been higher than we anticipated. Transactions are, on average, about 20 per cent higher in terms of the amount. They’re happening about twice as frequently as we had initially anticipated,” Jacobs said. 

“We will ramp up in the second half of the year as a fully fledged product,” she added. 

“This is a really great product proposition that moves us into a new market space as well moves more into that payment space,” Jacobs said. 

“We’re really excited about this and see it being a big part of our business going forward,” Jacobs added.

Businesses can pay any supplier with credit facilities of between £2,000 and £30,000 and spread the cost over three months. They get charged a 3 per cent one-off fee.

“We found that small businesses really find that very valuable for managing cash flow. And some of them actually get a discount for paying early And so they’re taking arbitrage and making a bit of money,” Jacobs said.  

“Others are just using it to save and manage their cash flow, particularly during bumpy periods.  Cash flow is always the thing that comes up in terms of small businesses’ biggest pain points,” Jacobs said. 

Mondu has a BNPL product for B2B marketplaces and B2B merchants and recently nabbed Miyu Lee as Chief Legal Office and General Counsel Klarna. 

The sector is still nascent but with a host of newer players competing across Europe as well as more established names such as Funding Circle now ramping up their activities B2B BNPL is a clear area bucking the bearish market sentiment.