Buy-now-pay-later products — originally consumer-focused (Afterpay, Zip, Klarna) — have expanded into the B2B space. Products like Hokodo, Tillit, and several bank-backed offerings now provide short-term trade finance to business buyers, allowing them to delay payment to suppliers while the BNPL provider pays the supplier immediately. From a supplier's perspective this sounds appealing. The risk profile is more nuanced.
How B2B BNPL works for suppliers
A supplier offers B2B BNPL as a payment option at checkout or invoice stage. The buyer applies for the facility. If approved, the BNPL provider pays the supplier (typically within 1–3 business days, less a discount or fee), and then collects from the buyer over 30, 60, or 90 days. The supplier's credit risk is transferred to the BNPL provider — on the specific transaction, the supplier is paid regardless of whether the buyer pays the BNPL provider.
The supplier's residual risk
The transfer of credit risk sounds complete, but suppliers should read the terms carefully:
- Recourse clauses: some B2B BNPL products include recourse clauses — if the buyer disputes the transaction (claims goods not delivered, quality issue, etc.) the BNPL provider may claw back payment from the supplier. The dispute resolution process in these arrangements matters significantly.
- Discount rates: BNPL providers charge the supplier a discount (fee) that effectively reduces the invoice amount received. For thin-margin businesses, this may make BNPL unviable on certain product categories.
- Customer dependency: if customers become reliant on BNPL as their primary payment mechanism and the BNPL provider changes terms or exits the market, the supplier may suddenly face late-paying customers who lack an alternative payment mechanism.
Regulatory developments
The Australian government has been consulting on BNPL regulation, and in 2024 amendments to the National Consumer Credit Protection Act were progressed to bring consumer BNPL products into the credit licensing regime. Whether and how B2B BNPL products are captured by the evolving regulatory framework depends on product structure — some B2B products are structured to fall outside consumer credit regulation. Suppliers should be aware that the regulatory landscape is shifting and that BNPL providers in this space may face compliance changes that affect product terms.
Practical considerations before signing up
- Read the recourse and dispute provisions carefully — understand in what circumstances the BNPL provider can recover amounts from you.
- Calculate the effective cost compared to your current terms and DSO — if your customers already pay on time, BNPL may be an unnecessary cost.
- Understand what happens if the BNPL provider changes its terms or is acquired.
- Consider whether offering BNPL to some customers but not others creates equity issues in your customer relationships.
Contact Merion if you are evaluating trade finance products and want to understand how they affect your overall credit risk profile.