For decades, financing for business transactions has relied on payment terms like Net 30, Net 45, Net 60, or even Net 90 to manage cash flow.
In other words, the expectations of payment in 30 days or 60 days, etc. from when the goods were dispatched or services rendered.
This version of extending trade credit has enabled suppliers to give buyers extra time to pay. Helping them buy now and pay later—but in a slow, traditional way.
Today, a new short-term trade finance solution is shaking things up: B2B Buy Now, Pay Later (BNPL). It’s faster, digital, and flexible.
Let’s compare how businesses have handled payment terms in the past and how BNPL is changing the game.
The old way: traditional payment terms
Historically, businesses had to negotiate payment terms with suppliers. To reduce risk, suppliers checked credit scores and past payment history.
If a buyer wasn’t well-established, they might get shorter terms or none at all. This has made it challenging for SMEs to compete and grow.
Advantages of traditional payment terms
These terms generally worked, and provided these advantages:
✅ Cash flow fix: Helped buyers manage cash flow
✅ Pay later: Let businesses get products before paying
Disadvantages of traditional payment terms
But, handling payment terms this way came with some disadvantages:
❌ Approval was slow: sometimes taking weeks
❌ Risky for suppliers: they had to trust that buyers would pay
❌ Limited access: smaller businesses often got worse terms, or no terms at all!
❌ Non-digital: lack of digitalisation kept the process slow and prone to human error
❌ Source of funds: How can the supplier afford this? From bank loans? From their own treasury? Does it negatively impact their cash flow?
Payment terms v2.0: B2B BNPL solutions
In recent years, B2B BNPL providers have transformed how businesses access payment terms. Instead of lengthy negotiations, businesses can often apply online and receive approval in as little as 5 minutes, thanks to AI-driven creditworthiness checks. This speed is a significant advantage compared to the traditional process, which could take an average of two weeks.
Advantages of payment terms via BNPL
Main advantages of using B2B BNPL solutions to provide or get payment terms include:
✅ Fast approvals: AI checks creditworthiness in real-time, significantly reducing approval times. That said, a good BNPL provider will also retain human risk assessment and underwriting capabilities.
✅ More flexibility: Businesses gain the option of which payment terms to use based on the BNPL provider’s risk assessment. 30 days? 60 days? 90 days? Even 120 days? The buyer is informed immediately at checkout, and can make the choice in real time.
✅ Less risk for suppliers: B2B BNPL providers assume the credit risk, ensuring suppliers receive payments promptly and reducing concerns about unpaid invoices. This leads to increased cash flow and lower DSO. Not to mention less stress, time and costs on collections.
Do your homework
Using payment terms via B2B BNPL offers many benefits, but businesses should be aware of:
⚠️ Potential fees or interest charges associated with these services.
⚠️ It remains essential to evaluate the terms carefully before committing.
⚠️ Make sure the BNPL provider has robust, long-term, credible backing.
Why B2B BNPL is the future of payment terms
Modern businesses need instant credit, easy approvals, and flexible payment options. Providing or receiving payment terms via BNPL brings all this while reducing risks for suppliers.
Let’s be clear: traditional payment terms aren’t disappearing any time soon. But, BNPL is giving businesses a modern, digital alternative. Cash flow is king, so having more payment options is always a win. Terms.Tech (an AREA42 working capital solution) ticks all the boxes!
Offer payment terms with B2B BNPL
Are you a B2B marketplace or merchant? Want to offer payment terms via B2B BNPL to platform users or customers? Just get in touch with our payment terms experts today!
