Buy now pay later has come for small businesses
Two Australian small business lenders now offer interest-free payments products.
The booming buy now pay later sector, led in Australia by the likes of Afterpay and Zip, has made its way into the small business market. This week, small business lender Moula announced the launch of its own buy now pay later product. This follows along from small business lender Prospa launching ProspaPay in May 2019 alongside its Initial Public Offering (IPO).
Buy now pay later has proved a popular market with consumers. Results from Afterpay released this week show it is currently onboarding over 12,500 new customers per day, taking its total customer count to over 5.2 million. Local competitor Zip has also seen impressive growth, counting more than 1.3 million customers on its platform.
And the consumer market is attracting new competitors. CommBank entered an exclusive partnership with European buy now pay later provider Klarna while FlexiGroup has also this week announced a partnership with Mastercard for its new product Bundll alongside its current offering Humm.
According to Moula, it launched its Moula Pay product to meet the increasing demand for instalment-based payment terms.
"We know how hard it is for Australian businesses to access funding to support day-to-day operations and there's opportunity on both sides of the merchant and business customer relationship with Moula Pay," said Moula CEO Aris Allegos.
Pre-approved small to medium-sized businesses (SMBs) will be able to purchase goods and services up to $250,000 using Moula Pay and have up to 12 months to repay. The first three months will be interest-free.
ProspaPay works slightly differently. Businesses are approved for a credit limit up to $20,000 which they can use with select vendors. They then have 13 weeks to repay. The repayment is interest-free, there are no fees and SMBs can reuse the limit.
According to Prospa's FY19 results, it estimates the potential buy now pay later business market opportunity to be over $100 billion. As of 30 June 2019, there were 70 vendors available on ProspaPay with an average transaction value of $2,600.
Managing director and CEO of Bambis Imports Harry Pourounidis, who is a Moula Pay merchant, said the product will enable customers to order stock when they need it with less concern over cash flow.
"Most of our customers are retailers who often need to plan 6 months in advance to purchase inventory for their campaign cycles. Moula Pay allows Bambis to provide a greater number of customers with the ability to buy more upfront and sell more simultaneously," Pourounidis said.
Allegos said the product allowed Moula to back merchants while getting behind their good business customers as well.
"Merchants are able to outsource their credit management functions more cost-effectively than typically administering payment terms in-house," he said. "They've also opened the door to the significant pool of SMEs seeking to spend more on business purchases if they had additional funds and longer to repay."