Most of the coverage about buy now, pay later focuses on how the installment-based payments model impacts consumers. In particular, the focus has been on the Millennial and GenZ consumers flocking to BNPL as a friendly (ostensibly) alternative to traditional credit.

Yet increasingly, as asserted in an interesting PYMNTS article, BNPL is a factor in small business finance.

Small businesses historically struggle to access capital with the same ease as enterprises. Often, small business owners rely on credit cards or personal assets to pay the bills. This is more acute in emerging markets. Banks in these markets are often reluctant to extend credit to SMBs, which they often see as too small and too risky.

The context of the PYMNTS piece was the recent (up to) $500 million debt round by Keo World, a Miami-based company that used the BNPL model to offer supply chain financing. The seven-year debt facility comes from Hayfin Capital Management LLP, which KEO describes as “a leading alternative asset management firm.”

Filling a Lwending Gap

Notably, Keo’s focus is on Latin America. And the debt round is aimed specifically at scaling its BNPL solution in Mexico. Keo currently serves 12,000 businesses in Colombia, the Dominican Republic, Ecuador, Peru, and Mexico. CEO Paolo Fidanza founded Keo in 2020.

Keo operates via a partnership with American Express. Its Workeo product involves Keo issuing SMBs a Keo American Express Virtual Card plus a credit line. That is, once they make it through a digital approval process.

Retailers that want to offer Keo’s BNPL to their B2B customers can do so instantly without any integration. However, they need to accept payments via American Express.

Fidanza says his company’s model fills a major gap for Mexican SMBs.

“In a market where less than 12% of total traditional credit is extended to SMBs,” Fidanza says. “Our Workeo product allows business buyers to access key inventory on credit, and suppliers to increase their recurring sales, enhancing working capital management via an all-digital frictionless and low-cost inventory financing platform, thanks to the American Express network.”

BNPL Going B2B

What Keo is doing is yet another example of how BNPL is rapidly going vertical and B2B. It stands to reason that the same principle that has helped consumers stretch a dollar (or more accurately buy time) will become attractive to SMBs.

We have written frequently about how cash flow problems are a leading cause of death for small businesses. And inventory and payroll are two cash flow bottlenecks that credit often solves. Without access to credit, otherwise viable businesses can face an early demise. BNPL may prove to be a game-changer here.

We’ve also said often that it makes sense to think about small businesses the same way we think about consumers. So it also makes sense to assume that small businesses owners are using BNPL for business purposes in ways that are hidden as consumer purchases. For example, if a business owner uses personal credit to buy new computers for the store via BNPL.

So using BNPL as a way for SMBs to handle supply chain finance makes perfect sense. And this is especially true in emerging markets where banks have largely left SMBs behind.