Gary Vee would likely tell a small business owner, with withering confidence, that content is king. Most business owners would probably scoff and say, “Nope. Not even close. It’s cash flow, you idiot. Now take off that stupid hat.”
In that vein, we came across an item this week that falls into the category of helping SMBs get paid faster. After all, the only thing worse than getting stiffed completely is getting paid 120 days late, or worse.
Large organizations with deep pockets can weather these cash flow storms much more easily than small and medium-sized businesses. Yet B2B customers expect SMBs to offer flexible payment terms. Not doing so makes it hard to stay in the game against enterprise competitors.
So we were interested to read that Resolve has raised $60 million. The company is applying the buy now, pay later model, unit now a popular consumer payments trend, to the B2B space. Investors include Initialized Capital, KSD Capital, Haystack VC, Commerce Ventures, Clocktower Ventures, and Affirm, among others.
A New Spin on BNPL
Resolve emerged from a San Francisco-based venture studio created by Affirm founder Max Levchin. He was also CTO and co-founder of PayPal, which makes him part of the pantheon of American fintech.
Resolve’s founders Chris Tsai and Brian Nguyen worked closely with Affirm as they developed the business idea. This led them naturally to the BNPL model. But since the consumer angle was already done to death, why not B2B? They launched the business in 2019.
The use case is pretty clear. B2B customers are always looking to stretch payments, essentially using their suppliers as a de facto source of credit. Whether the supplier is on board or not. Using Resolve, they can finance these extended payments, getting the cash upfront. They pay Resolve for this service, of course, but it beats chasing customers for payments that are 30, 60, 90 days late. Or worse.
Here is what resolve CEO Tsai says about the new round.
“Digital and e-commerce transformation is coming for B2B payments. Growing companies must balance heightened demand for deferring payments from their business customers with their own limited capacities to satisfy that demand. We are thrilled to have these investors join us as we solve this challenge for growing B2B companies. This round of equity and asset funding will scale our ability to embed credit billing for these businesses to unlock sales growth and cash flow while minimizing risk and effort.”
All About Integrations….and Data
Resolve works by integrating its digital net terms and credit billing platform into whatever financial technology stack the business uses. So as we see over and over again, integrations are the name of the game.
Another key to success for platforms like Resolve is their ability to rapidly and accurately assess credit risk. Since the platform fronts the payments to its B2B customers, minus fees, its ability to minimize bad debt is a critical success factor. To say the least.
So not surprisingly, one of Resolve’s key selling points is its “Smart Credit Engine”. According to Resolve, this “creates a direct sync with a merchant’s real-time data feed of past payment histories to enable immediate credit line decisioning with no input required from buyers.”
Innovations keep coming in the B2B and B2C payments space, all designed to make it easier to access cash that has been earned, but not collected. Last week we wrote about earned wage access, which involves fintechs giving employees early access to wages for a small fee. This helps keep lower-wage workers off the crack pipe of payday loans. And this reduced financial stress among workers is arguable good for employers.
The risk of offering BNPL to B2B companies is higher, however, since it depends on buyers coming through with payments. This seems far more fraught with risk than waiting for employers to make payroll. Hence the critical importance of risk management. Risk aside, we expect to see Resolve operate in an increasingly crowded field over the coming months.