• Financing a B2b Business

    Business to business financing is simply the finances available to the companies that work primarily with other companies. Traditionally banks dominated such finances, but recent rise in fintech sector, have made finances more accessible in the b2b market, these fintechs have made the process involved much simpler and any b2b business can take advantage.

    What are B2Bs

    B2B companies, business-to-business companies which provide goods and services to other enterprises, play a very pivotal role in the functioning of an economy.In the B2B segment transactions occurs between manufacturers and wholesalers or wholesalers and retailers, these transactions are very common in supply chain as companies purchase components and products which are later utilized by other business house in the manufacturing cycle.

    Rise of B2Bs: B2B E-Commerce

    The future of B2B is sparkling bright with new technologies being developed and in the rise of Analytics, machine learning and artificial intelligence,these help e-commerce companies immensely, in analyzing in detail, improving product and customer experience and retention. Unaccustomed sellers are now entering into the digital world,where a local seller gets entire segment domain exposure through-out the world, these unaccustomed sellers are now taking advantage of analytics to optimize their supply chain, better predict for peak periods, reach new customers and new markets.

    It is crazy to think how easily business houses can reach other business houses located farther away.

    Traditional Method of Financing B2B business

    Term Loan : Term loans can be categorized into two types, secured where there is a collateral attached to the loan, unsecured where there is no security required. Term loans offered by financial institutions can be for short-term, intermediate-term or for long-term. These types of loans are very useful for SMEs during their early stages or when they are expanding their business. Business loans are very useful in the early stages of SMEs in the early or expansion stages.

    Working Capital Loan : Working capital loans is a type of a small business loan taken to overcome shortages and crunch in cash to operate the business efficiently and on a day-to-day basis. Such loans help to ease the cash flow necessary to run the business.This type of loan is very helpful in dealing with a shortfall of cash during off-season or to prepare for increased demand during the peak season.

    Invoice Financing : Invoice financing, also known as invoice discounting, is a type of funding used for businesses that encounter a time lag between generating invoices and receiving payments from their counterparts. The financial institution provides funds against the invoice amount generated.

    Overdraft : An overdraft facility is provided against collateral, especially in terms of fixed deposits with the chosen financial institution. The lender analyses the borrower’s credit history, relationship with the institution, business cash flow and the repayment history before approving an overdraft.

    Evolution in Financing

    Financing of B2B has been stagnant for many years, traditionally business houses have relied on bank loans and a range of different credit tools provided by NBFCs. Innovation in finance and technology and with the boom in neo-banking services and buy now pay later (BNPL), business houses have easier access to various credit instruments and invoice financing. Previously companies needed to apply for loan applications which required a large volume of supporting information to be provided and a lengthy process to comply against strict regulatory requirements. These applications could take a long time to get approved. With the scale at which digitization of the Indian economy has been, the new age fin-techs have become a hot alternative for credit.

    Plug and Play APIs : Software-as-a-Service or SaaS has revolutionized the financial industry by enabling financial institutions and third parties to interact directly with the banks via APIs to enable specialized banking services such as loans, debit/credit card, deposits,insurance and payments. Banking-as-a -Service or BaaS interfaces have emerged as a crucial component of the open banking system that helps fintech to leverage these technologies. Today there are a plethora of fintechs offering API services allowing businesses to pick and choose services from various providers to integrate and give them their very own clients.

    Improving KYC : The emergence of digital locker and fintechs have revolutionized the traditional verification, which was lengthy, cumbersome and full of bureaucracy, these digital lockers and fintechs has increased the demand for better risk management technologies, building system that communicate with each other to enhance KYC features to validate users and documents.

    Embedded Finance : Embedded finance is the integration of financial services or tools traditionally used by banks within the products or services of a non-financial company. Embedded finance has streamlined the financial process in the B2B segment, where businesses can comfortably raise credit without needing to visit any banks in person.By offering finances directly with the partners, the business companies need not to spend time searching for third party vendors for finances. Being able to offer financial services to B2B clients ensures robust cashflow which support the sales of all parties and ensures positive and uninterrupted trading conditions. One of the most popular types of embedded finance is embedded lending, this is where credit or financing products are integrated into the api , essentially allowing buyers to access deferred payments facilities without having to go to a bank or lending institution. Embedded lending is very prevalent in the consumer focused market known as BNPL with well-known players like Simpl,Postpe, however, there is a burgeoning B2B BNPL market enabling businesses to access an improved digital version of bank loan facility.


    Fintechs and have created an atmosphere where a business company facing cash crunch can seek loans reliably and securely and hassle free, they not only revolutionize the financial game but have also come forward with new solution to cater the specific needs of each B2B segment, which otherwise was unchanged in pre covid times, although there are few questions as to how intricate and specific services can fintechs offer, they have surely kick started a cash deprived and covid struck B2B business’ engine. Fintech have changed how lending transactions occurred, how documents were validated and how creditworthiness was evaluated with ease.