In Australia, buy now, pay later services for consumers have transformed the retail landscape with their ever-growing popularity. Research by Mozo revealed that around 30 per cent of Australian adults have used a buy now, pay later (BNPL) service as a payment option. Nearly half of BNPL consumers have stopped using their credit cards to make purchases.
Moula Pay is one of the first buy now, pay later services made specifically for business-to-business (B2B) transactions in Australia.
Business cash flow – a sticking point in business-to-business transactions
Research conducted by Moula uncovered that cash flow is a big pain point that stifles buyers and sellers in business-to-business transactions in Australia. Our quarterly research shows that among SME customers:
- 49% would spend more on business purchases if they had additional funds
- 47% hold back from investing in their businesses if they don’t have the available cash flow
- 46% would order more stock if they had additional funds available.
At the same time, SMEs selling to other SMEs experience challenges as well. Among SME merchants:
- 65% of their SME customers don’t pay on time when given invoice payment terms
- 63% experience cash flow issues as a result of late payments
- 51% don’t offer payment terms due to the potential negative impact on their business.
While many merchants offer payment terms to their business customers, many do so because their competitors do and their customers expect it, regardless of the impact on their cash flow. In addition to the cash flow issues, time and resources are needed to approve and administer credit to purchasers. Businesses that outsource this function end up paying an additional cost.
While B2B buyers and sellers would like to make more transactions, a lack of cash flow gets in the way. Moula’s research revealed that more than half of SME buyers would consider a buy now pay later product for business purchases.
Bridging the gap between business buyers and sellers with buy now pay later finance
Given the cash flow divide between business buyers (customers) and sellers (merchants), Moula has developed a two-part solution called Moula Pay. It helps business customers access much needed extended payment terms, while the merchant gets paid upfront every time and never risks not getting paid.
After successfully going through a quick approval process, business customers can use Moula Pay for purchases of up to $250,000. After making a purchase, buyers get three months interest-free on the transaction amount. After that, they get another nine months to pay off their purchase with an interest of 3% per month on the outstanding balance. So it’s like getting an interest-free business loan for three months. This gives business customers flexibility in managing their cash flow.
On the seller side, Moula Pay merchants get funds immediately when buyers use Moula Pay. This means they don’t have the cash flow issues resulting from slow-paying customers. In addition, they don’t have to administer payment terms, invoice customers and follow up when invoices are overdue.
A hypothetical example of how buy now, pay later works for businesses in Australia
Sandra owns a retail gift shop and needs inventory for the busy Christmas season. However, her business is coming out of a slow season and she does not have cash on hand to purchase the inventory she needs. One of her main suppliers is a Moula Pay merchant. Sandra completes the simple online application with Moula and gets an account approval with a credit limit within 24 hours.
Sandra uses the funds to stock up on inventory. She has the first three months to repay the amount without incurring any interest on the transaction or she may choose to take advantage of this repayment free period. So it’s like getting an interest-free business loan for three months. After the this period, there is another nine months to pay off the balance in monthly instalments at an interest rate of 3% per month.
A retail shop is just one example of how Moula Pay can be used. Any business that sells or purchases services or products can benefit from Moula Pay in Australia. For example:
- A construction company can purchase materials needed to complete a project
- A manufacturing company can purchase equipment to improve its productivity
- A business can purchase advertising services to boost its sales.
Whatever the reason, buy now, pay later for business creates win-win outcomes for buyers and sellers in the business-to-business marketplace.
Learn more about how Moula Pay can help businesses overcome their cash flow challenges.