The pandemic has made every aspect of life difficult, personally and professionally. In September of 2020, Yelp reported that almost 100,000 U.S. businesses that had been in operation as of March 1st had permanently closed by August. The hardest-hit sectors were restaurants, retail, nightlife destinations, spas, and fitness—businesses that rely on crowds to make a profit.
“You have to evolve or die. We’re in survival mode,” said Patrice Graham, owner of Colors of Yoga Raleigh, in an interview with CNBC. Graham ultimately had to abandon her physical studio and switch to teaching classes online just to keep her brand alive.
Even in the best of times, the ability to adapt to changing tides keeps businesses relevant and prosperous. But over the past year, small businesses have had to adapt to lockdowns, supply shortages, hostile patrons, and more. The strain has been crippling for many, but the pandemic has also revealed many opportunities for improvement in the systems designed to support SMBs. This includes the adoption of new payment systems to meet specific and crucial needs.
One of these systems is buy now, pay later (BNPL) financing in the B2B space—a payment platform that gives even the hardest hit SMBs a path to afford business-critical equipment. Here’s why offering such a payment platform to your customers is critical to yours, now more than ever.
A Closer Look at the Health of U.S. SMBs
The MetLife & U.S. Chamber of Commerce Small Business Index (SBI) is dubbed “The Voice of Small Business Owners.” The index aggregates the survey results of thousands of SMBs and quantifies the health of the whole with a single SBI score. In Q1 of 2020, before the coronavirus gained steam in the U.S., the SBI score was 71.7 out of 100. By Q2, that score had plunged to 39.5.
The Q1 score for 2021 shows a modest increase (55.9) but the attitude among SMBs surveyed remains subdued or cautiously optimistic, with three-quarters (76%) still preoccupied with concerns about their finances and only 45% confident about their ability to stay open indefinitely in the current economic environment—up from 23% in late April 2020.
Most indicators show that the trend toward recovery will continue as many businesses (32%) plan to increase hiring and 59% predict a return to business as usual within six months to a year.
So what does this mean for you? As you blaze your own recovery path, appreciating the mindset and situation of the SMBs you serve will help you craft purchasing solutions that meet their present needs, such as a BNPL payment platform that allows for installment-based purchasing.
How B2B Lending Requirements Fail to Adapt to Every Customer
SMBs are the backbone of the economy, representing 99.9% of all U.S. businesses and providing jobs to over half the nation’s private workforce. However, traditional B2B lenders are tightening their requirements in response to the pandemic’s financial impact and leaving many hard-hit professional consumers, or prosumers, without access to the capital they need to nourish their businesses during this crucial time.
“We’re here to serve our community,” said another small business owner to CNBC, Joy Currey, Executive Director of Corral Riding in North Carolina. “And if we find that there’s a better way to serve our community, if we learn new practices, we’re going to take them forward.”
The old practice of going to a traditional B2B lender no longer works for at least 40% of your customer base. Either their FICO nose-dived during the pandemic, they haven’t been in business very long, or the funds they need are too small to be worthwhile to loan officers. But the fact remains that SMBs are essential and struggling. An extra payment option may be just the helping hand they need.
What B2B Can Learn From a B2C Purchase Option
Popularized in the B2C market, BNPL payment platforms are relatively new to the B2B space. But an increasing number of SMBs are embracing the new system as a way to bypass the hardline FICO and TIB requirements of traditional lending. How?
As a no-fee, installment-based payment platform, Clicklease is a BNPL option designed for the B2B space. Using a proprietary underwriting algorithm, Clicklease can deliver solutions that are critical to SMBs today:
- The average funded transaction is less than $7,000
- There’s a 68% approval rate
- 50% of originations have less than 3 years TIB
- 46% of originations have FICOs less than 650
- Underwriting takes seconds with no docs required
Even as federal stimulus eases the strain for many, at least 40% of your customer base still does not qualify for working capital loans. This is where a payment platform comes in, creating a critical opportunity to cater to a neglected market, make more sales, and support small business recovery.