Squeezed business finances from the highest levels of inflation seen in decades are creating conditions for business financing to be done differently. In our recent research report ‘Small business financing done differently’ we interviewed hundreds of small to medium size business leaders across Europe to explore the opportunities and barriers to the use of Buy Now, Pay Later (BNPL).
The research finds that over half (55%) of SMBs surveyed have between £10k and £75k owed to them by customers every month, with one-third (36%) of businesses needing the funds to remain solvent. Given the severity of these liquidity concerns, business leaders are currently spending valuable time and resources away from their core business duties to focus on critical finance-related admin, with almost 75% of business leaders surveyed stating that they are reliant on handling invoicing in-house either by themselves (21%), or through the use of an internal accountant (50%).
With over £23 billion owed to businesses in late payments in the UK alone, the findings highlight both the difference these funds can make to a small business staying afloat or going under, as well as untapped potential for growth across the economy. When asked how they’d use the funds owed to them if they weren’t tied up in outstanding invoices, almost half of respondents (44%) said they would spend the money upgrading their technology, and a further 40% that they would recruit more staff. The findings suggest that monies owed on invoices are currently preventing small businesses from growing with a further 22% of respondents stating they would expand their physical or online footprint, 28% undertaking more marketing activities, and 20% stating they would spend more with suppliers.
Difficulties accessing finance
Circumstances created by the pandemic have meant that the number of businesses taking on debt has grown. Recent data from the FSB showed that SMBs in the UK alone are collectively carrying around £36 billion more in debt compared to before the Coronavirus crisis. Yet while the demand for credit is high, accessing it is still a struggle for many small and medium businesses.
With liquidity a concern for businesses across the board, BNPL offers businesses short-term loans to help smooth cash flow, support innovation and enable expansion through the purchasing of products and services without committing to a full payment upfront, but nearly half (43%) of SMBs surveyed are unaware of this potential option. Lack of awareness also proved to be the most common barrier to BNPL take-up with 25% of respondents believing that BNPL wasn’t for businesses like theirs and a further 25% feeling it was too risky.
The findings from our survey suggest that there is an appetite for more user-friendly BNPL options, but there is currently a knowledge blindspot, which, if addressed, could accelerate adoption. Read about our BNPL findings in our ‘Small business financing done differently’ eBook here.
