As Suppliers Hike Costs, Small Businesses Set Sights on BNPL to Pay

As wholesale prices continue to rise, BNPL could prove a lifeline for small businesses.

That is especially true for Main Street small businesses, the backbone of the U.S. economy.

As PYMNTS’ recent surveys of SMBs have shown — consistently — inflation is top of mind for business owners. And coming into the new year, they’ve seen inflation as their biggest challenge. Less than a quarter of these companies say that inflation will return to normal within a year.

The latest data from the government signals the wait for inflation to abate will be long.

From December to January, the government’s producer price index jumped 0.7% — a reversal of the 0.2% drop that had been seen in the previous month.

The PPI, as it’s commonly called, was up 4.5% from a year ago. And it measures the prices charged by the producers of the goods and services that we, as consumers, ultimately consume — but they give a sense of how pricing is trending up and down supply chains.  

The PPI is, over time, a gauge of how consumer prices will ultimately fare.  

Negative Ripple Effects

But the PPI also indicates how much the cost of keeping the door open, the shelves stocked and the lights on really does ripple through the B2B ecosystem.  

This time around, the prices of finished goods for final demand and for goods that flow through the chain to be worked on in some way (before becoming final-demand goods) saw gains in the latest reading.

There’s not much room for Main Street SMBs to maneuver in the bid to keep margins from being pressured even more than they already are. Wages are tough to cut because salaries keep talent on hand and staff behind the counter. Automation helps but requires capital investment. More firms are looking to modernize operations, though. As PYMNTS reported recently, in just one example, 30% of construction firms are investing in tech to save time and money and improve back-office functions.

Most immediately, BNPL can help these firms navigate the pressures of getting inventory and raw materials on hand to keep their businesses viable and manage costs. 

There’s no shortage of coverage on our digital pages of the pain points inherent in B2B payments, where cash flow is stymied while chasing down funds owed and where tapping working capital can be difficult across banking channels.

However, business owners are also consumers. As consumers, we’ve gotten used to BNPL as a way to break down daily (and big-ticket) purchases into manageable weekly or monthly obligations. That appeal carries over to business payments too. By paying over time, the SMB can conceivably conserve cash flow and match cash outlays more firmly to the cash that comes in the door as it gets paid by other enterprises or end customers.   

An increasing number of providers are taking advantage of that greenfield opportunity — and it’s a global one. To list just a few announcements in the last few weeks: B2B BNPL startup Mondu has added $13 million to its Series A funding round and has raised $56 million to boost its expansion in Europe. Hokodo and Lemonway announced last month that they have partnered to enable B2B marketplaces in Europe to offer trade credit online.

In a separate interview with PYMNTS, Plastiq COO Stoyan Kenderov and Obvi CEO and Co-founder Ronak Shah said that B2B BNPL can help SMBs, particularly retailers, bootstrap more efficiently, unlock cash flow and scale.  

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