Today, alternative small business (SMB) lending company Fundbox is launching Fundbox Pay, a solution the company says will move its credit offering closer to the B2B transaction itself.
Fundbox Pay will let suppliers request payment on an invoice presented to a small business customer, and invite them to use credit via Fundbox to pay their it. It negates the need for buyers to expose personal credit histories, while being offered 60 days of float time without interest (they can extend their payment terms longer, for a fee). Paying via Fundbox Pay has to be initiated by the supplier, which can send a link with an invoice for buyers to get on-boarded and complete payment.
Prashant Fuloria, COO of Fundbox, recently told PYMNTS the solution aims to strategically place financing closer to the moment of SMB2B payments truth: the moment a bill has to be paid. Getting paid late often forces suppliers to turn to alternative forms of working capital when payment. Fundbox Pay turns the tables and puts money in the supplier’s pocket by making it possible for the buyer to do that by financing those payments.
Of course, better is all in the eye of the beholder.
“By making credit available at the point of the transaction, we’re bringing credit closer to the moment of relevance. We’re trying to make a better transaction for buyers and sellers and addressing the root cause of what drives a lot of cash flow challenges," he said, adding that the delay in payment is often the result of liquidity issues on the part of the buyer who, in turn, creates working capital issues for the seller.
The solution is an effort to make B2B payments more efficient for both ends: Suppliers get paid more quickly, while buyers can still enjoy longer payment terms without forcing their suppliers to wait.
It undeniably takes a page from credit cards’ book, but according to data from NACHA and the Credit Research Foundation released last year, credit and debit cards currently make up just 11 percent of payments received by accounts receivable departments in the U.S.
That’s due in large part because suppliers don’t like taking the interchange haircut on a credit card payment, particularly when amounts total in the thousands of dollars.
The workflows of B2B payments are another factor that challenge credit card adoption, especially considering the fact that often, a B2B payment may not be what's on an invoice.
In industries like perishable goods, a buyer may want to receive an order and check that all items have arrived as they intended before paying. Often, Fuloria said, the final transaction does not match the dollar amount of an invoice.
Late and delayed B2B payments have turned many small business suppliers into a sort of "free bank" for their corporate customers. The B2B FinTech world has taken an array of measures to address this problem, from introducing new trade finance products, to developing trade credit insurance and new risk analysis models.
But the problem persists largely because payments behavior does not change without a fight.
"Many payments efforts fail because it is hard to change behavior - frankly, in the consumer or in the business space," said Fuloria. "Very often, there isn't enough value. To be honest, a slightly more convenient way to pay is not enough value for someone to change."
For suppliers, the value of getting paid more quickly is not just a pleasant benefit - it can often mean survival.
In the case of small businesses, this isn't just a pain point, it's existential," the COO explained. "What is your cash flow? What is your working capital? Will you even survive a scenario in which two of your customers pay you late?"
But the value must also be strong for the payer, too, said Fuloria, and any change in payments behavior has to fit seamlessly within a company's existing accounts payable, accounts receivable, accounting, invoicing and other processes involved in a transaction. That means being able to fit into a company's ongoing use of paper checks, for instance.
"We are trying to meet customers where they are," the executive said. "We're not trying to get them to change their invoicing system.
But instead, how they manage who they pay and when.
Fuloria acknowledged as much
Change will take a while,” he continued. "And it's not always easy. You have to create value on both sides. We're taking the lessons learned from the last 20 years of payments."