The B2C market has a wealth of installment payment solutions to choose from, each offering an interest-free way for consumers to pay for purchases over time while receiving the item upfront. Now, the B2B market will also be able to tap into this finance solution with the introduction of Splitit Business Payments.
The new offering is directed at smaller retailers and buyers who may have less flexibility with their cash flow. The traditional timeline for purchase orders requires the buyer to pay the full amount upon ordering — months before receiving or even selling the product. This can complicate merchandise strategy and encourage buyers to act conservatively so as to protect their financial reserves.
“In the past, when a client orders $10,000 worth of shoes, we’ve used credit cards to have them prepay for goods that may take 30 to 90 days to sell,” said Ron Kenigsberg, president at shoe brand Miz Mooz. “But when we’re ready to ship, we sometimes receive calls from our clients asking for us to hold or split up the shipment into multiple parts so they can cover the cost.”
Enter Splitit, whose Business Payments program functions similarly to the company’s consumer solution. Upon purchase, a hold for the full amount is placed on the buyer’s credit card — but not charged — thus saving the buyer interest. The client and merchant then agree on terms for a monthly installment plan, which includes timing for when the product will ship. The first installment is paid once the agreement is activated.
In addition to offering financial flexibility to buyers, Splitit’s service also removes risk for merchants, by providing the full payment amount upfront (Splitit assumes the responsibility of collecting payments from buyers).
To qualify for the program, a buyer does not need to undergo a credit check; however, it must have the full amount of the purchase available on an existing credit card. Splitit believes that this will encourage vendors to build new relationships by removing the friction of payment collection.
“Now, we can pre-authorize their credit, ship the entire order and provide securitized terms,” said Kenigsberg. “This removes the risk on our part and helps our merchants to have more time to sell the shoes — a better situation for both our company and our buyers.”
Buyers can use the service for free at any participating merchant; Splitit makes its revenue from charging merchants a transaction fee. The solution is designed to work for domestic and cross-border purchases and can be used with existing Visa or Mastercard credit cards.
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