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In the world of small business commerce, there’s a problem: B2B buyers and sellers want two fundamentally incompatible things. Sellers want to get paid for goods and services as soon as possible, but buyers want—and often truly need—extended time to pay. Fundbox Pay is looking to be the solution to fix this.
Usually in transactions between small businesses (also called SMB2B), the needs of buyers win out. That forces sellers to offer net-30, net-60, or other net payment terms to buyers in order to stay competitive. But that can often cause cash-flow issues that puts stress on accounts payable.
This friction between sellers’ and buyers’ needs has created the current system of trade credit, and in the US today, 43% of the total B2B sales value is transacted on credit. Small businesses in particular feel the pressure that delayed payments creates. Based on an analysis of Fundbox customer data, 64% of small businesses are affected by late invoice payments.
Fundbox Pay is a new SMB2B payments and credit network, developed specifically to address this predicament.
One reason sellers are forced to extend terms and spend so much time waiting for payments is that small business buyers face significant barriers to getting credit any other way.
When most business owners think about business financing, traditional term loans from major banks are usually the first option they try. However, that generally isn’t an option for most business owners.
In a recent SBA survey, 27% of businesses reported that they weren’t able to get the funding they needed. Conventional lending requirements aren’t built with small businesses in mind, and often fail to take the health of the business (as separate from the owner’s personal creditworthiness and metrics like FICO score) into full account.
Fundbox Pay is a new payment solution from Fundbox, the small business financing-focused fintech firm that you might know from their business line of credit and invoice financing products. Fundbox Pay, their new product, offers a way to give B2B buyers and sellers what they want.
Fundbox Pay allows sellers to get paid right away, while also allowing buyers to take up to sixty days to pay. It’s kind of a win-win in that regard.
To use it, sellers simply invite their customers to Fundbox Pay (kind of like Venmo!). If approved, those customers have access to Fundbox Credit™. When buyers pay their vendors using Fundbox Pay, they get convenient sixty-day terms, while the vendor gets paid by Fundbox right away.
For buyers: Those sixty-day terms come without any interest or fees. If they want, they can even extend the terms up to a year, for a flat weekly fee.
For sellers: Fundbox Pay grants ability to shift the risk and hassle of offering terms (and following up with buyers to chase late payments) onto a trusted partner. It’s similar to how consumer credit cards backed by financial institutions have functioned in the business-to-consumer world for decades.
Let’s look at the Fundbox Pay dashboard. Here’s what buyers see when selecting a vendor to pay:
If you’re a buyer using Fundbox Pay and you’re trying to pay a vendor you’ve paid before, you can begin typing that vendor’s name and it’ll auto-populate their information. That way, buyers only have to enter information once, saving time when making future payments.
If you’re a merchant using Fundbox Pay, you’ll see payments in your merchant dashboard, like this:
As a seller, you’ll see a prompt to review and accept the payment. Once you’ve accepted it, the funds are sent directly to your verified business bank account as soon as the next business day.
When using Fundbox Pay, all fees are flat and shown to you up front, giving you a chance to review and accept them. As a buyer, those first sixty days to pay are completely interest-free. That makes payments with Fundbox Pay the same kind of simple as using a credit card (and in many cases, an even better deal).
Platforms like Fundbox Pay are leading a wave of change in the way small businesses transact with each other. Thanks to the expanding availability of faster, data-driven credit for small businesses, SMB2Bs can finally take advantage of the type of credit-card-convenience that consumers have long enjoyed.