BNPL for Business Enables Pricey IT Investments, Helps Retain Customers

While working at a tech company, Kush Kella, who is now CEO and co-founder of Vartana, was exposed to the market of hardware and software financing. He found out that it’s an established, old market with many banks playing in the space and offering traditional products.

In that market, there’s a lot of emailing back and forth to get approvals on a certain transaction, a lot of offline communication and a lot of exchanging of copies of voided checks to set up automated clearing house (ACH) payments.

“That was my ‘aha’ moment because that industry has lagged 10 or 20 years behind the consumer industry,” Kella told PYMNTS. “If you look at the processes there, there is no online application for the most part, and the online application is just a lead-gen.”

Providing Financing for Business-Critical Purchases

What he and Ahmed Sharif started in 2020 is Vartana, a provider of managed checkout and buy now, pay later (BNPL) options for B2B transactions. In January, the company announced its launch with $57 million in seed funding.

There’s a need for BNPL in B2B, Kella said. Unlike consumers who may use BNPL to buy a pair of jeans, businesses are looking to buy potentially expensive technology that’s critical to their bottom lines.

For example, a company that hires 20 employees may not be able to afford to buy 20 laptops. That company would raise a line of credit, get a loan, and then go back to the market and shop for laptops.

“So inconvenient,” Kella said. “If the seller of those laptops or Salesforce licenses or whatnot could offer you monthly payments, it would be a better scenario for you — you just focus on building your company and not trying to negotiate with banks.”

Helping Sellers Keep Customers

For sellers, easy financing can help close the deal. If a customer hears the price and then must go to a bank to arrange financing, they might also shop around with other sellers. The initial seller loses the advantage it had.

“Imagine this: If you were to offer those monthly payments, there is no reason why that customer would have gone to a bank and then started consulting other sellers of this technology,” Kella said. “So, that’s one advantage, you can be sticky with your customer as a seller and offer them point-of-sale financing.”

Making It More Convenient for Buyers to Get Financing

For the buyer, B2B BNPL allows them to avoid the cumbersome process of going out to the market and getting a line of credit. It would be much easier to get the same level of financing from the seller who has the incentive to offer it because they’re trying to sell the product.

With the recently announced $57 million in seed funding, Vartana will have the deep pool of capital a BNPL provider needs to pay the seller before being paid by the buyer. The company will also help it grow its product development team, invest in account management and hire more sales staff.

“With the pandemic and all that, people are spending a lot more in digitizing their operations, so the need of capital to be able to purchase all these products is going to be much higher,” Kella said.