Builders Targeted for New BNPL Plan to Ease Pain of Pricey Materials Purchases

The construction industry has one of the longest days sales outstanding (DSO) — an average of 83 — so it seems a product that would let these professionals pay for the supplies they need without having to foot the entire cost upfront would be a good fit.

BlueTape Co-Founder and CEO Yaser Masoudnia said he saw the need, and now his company offers a solution. The financing and payment company specializing in the construction industry announced Tuesday (Nov. 9) the launch of its buy now, pay later (BNPL) product that enables builders and contractors to buy materials and then pay for them over 30, 60 or 90 days.

“We will call it ‘build now, pay later’ in the construction industry,” he told PYMNTS in an interview.

BlueTape’s primary focus is small- to medium-sized businesses (SMBs) in the market. There are more than 2 million of them in the United States, and 82% of them have fewer than 10 employees.

“There is a significant amount of small businesses that are doing the heavy lifting in the industry but have been neglected by a lot of financial institutions and have been considered risky,” Masoudnia said. “We built BlueTape to be able to service these guys.”

Creating a Unique Underwriting Model

Smaller construction companies have typically had a limited number of financing options. Traditional lenders tend to look at a wide range of industries and use a one-size-fits-all model for approvals. But construction businesses and contractors might not get paid for a few weeks, or even months.

“A lot of these businesses wouldn’t fit in that conventional model,” Masoudnia said.

So, BlueTape created an underwriting model with its partners that would help them get financing.

This model considers each business’s traits, its way of doing business, its history, and its specific trade and seasonality. By working with suppliers, too, BlueTape has access to transaction histories that help it determine whether builders can pay back their loans. With this better understanding, BlueTape can significantly increase the approval rate and give them better rates.

“But more importantly we can make decisions in real time,” Masoudnia said. “So, we are a point-of-sale solution. That was very important for us to be able to offer this flexible payment opportunity right at the point they have an invoice, and they want to purchase something.”

Helping Both Buyers and Suppliers

With the new BNPL product, when the builder or contractor wants to purchase material, BlueTape can provide its service on both sides. On one side, it enables dealers, suppliers, manufacturers and distributors to offer flexible payments to their customers. This helps them attract more customers and differentiate themselves in a commodity market, Masoudnia said. On the other side, BlueTape gives buyers, contractors and developers access to flexible payment.

That’s especially important with today’s supply chain problems and significant increases in prices. Recently, some construction materials have been selling for as much as four times the prices they commanded a couple of years ago, Masoudnia said. That has put a lot of pressure on suppliers and contractors alike.

The need to put down a deposit in advance has put builders and contractors in a similar cash crunch at a time when they need more money on hand than ever.

“Us coming in the middle will help the suppliers to get paid fast while they are offering flexible payment to their customers,” Masoudnia said. “That’s where we can help for both sides.”

Expanding Throughout the Supply Chain

BlueTape also offers a payment solution that it launched earlier this year. Clients can use BlueTape to collect their payments quickly, leveraging ACH or credit card processing. This is being used by contractors, developers, suppliers, architects, engineers, distributors and manufacturers.

The company aims to expand the BNPL offering throughout the supplier chain too.

“We started with suppliers using our product initially and offering flexible payment to contractors,” Masoudnia said. “Now we are seeing the suppliers who are using our product for their customers, they are asking us to be able to use the product for when they purchase from distributors and manufacturers.”