B2B Buy Now Pay Later: How It Works for Invoices

Quick answer: B2B buy now pay later lets a business buyer take 30 to 90 days to pay while the supplier gets paid within days. A third-party provider approves the buyer, pays the supplier upfront minus a fee and collects from the buyer later. It is a modern, outsourced version of trade credit.

Business buyers have always expected credit terms. A wholesaler, manufacturer or agency that insists on payment upfront often loses orders to competitors that offer net 30 or net 60. But extending credit yourself means waiting for cash, checking customers and chasing late payers. B2B BNPL providers sit in the middle: they offer terms to the buyer and pay the supplier quickly. This guide explains how the model works, what it costs, how invoices fit in and how it compares with factoring, dynamic discounting and simply offering your own terms.

How B2B buy now pay later works

The flow is similar across most providers, whether it appears as a checkout option in an online store or as a link on an invoice:

1. Buyer chooses terms. At checkout or on the invoice, the business buyer selects the provider's payment option, for example "pay in 60 days".
2. Instant credit decision. The provider checks the buyer's business details and credit, then approves or declines, usually within seconds or minutes.
3. Supplier ships and invoices. The order goes ahead and the supplier issues its sales invoice, with instructions to pay the provider.
4. Supplier gets paid early. The provider pays the supplier the order value minus its fee, commonly within a few business days.
5. Buyer repays the provider. At the end of the agreed term, the buyer pays the provider, not the supplier.

Some B2B buy now pay later providers also offer instalments, letting the buyer split a large order into monthly payments, and some provide a revolving credit limit the buyer can reuse across suppliers in the same network. The key change is who carries the receivable. In ordinary trade credit, the supplier waits and takes the risk. With BNPL, the provider takes over the waiting and, in non-recourse programs, most of the credit risk.

Who pays what

In most B2B BNPL programs, the supplier pays a fee, often called a merchant discount rate, deducted from the payout. Providers publish or quote rates that typically depend on the term length, order size, industry, transaction volume and how fast the supplier wants payout. Longer terms cost more. Buyers usually pay nothing extra for the standard term, but late fees or interest can apply if they pay late or choose extended instalments.

Because pricing varies so much, treat any figure you see online as a starting point and ask several providers for quotes based on your actual order profile.

Worked example: BNPL vs your own net 60 terms

Suppose a wholesaler sells a £10,000 order to a retailer that wants 60 days to pay. The rates below are illustrative only.

Option A: BNPL at an illustrative 2.5% merchant fee

• Fee: £10,000 × 2.5% = £250
• Payout within a few days: £10,000 − £250 = £9,750
• Credit risk: carried by the provider (if non-recourse)

Option B: Offer net 60 yourself, funded by an overdraft at an illustrative 12% a year

• Cost of waiting 60 days: £10,000 × 12% × 60 ÷ 365 = £10,000 × 0.12 × 0.1644 = about £197
• Plus your time on credit checks and chasing, and the risk of a late or failed payment
• If 1 in 50 similar orders defaults, the expected loss per order is £10,000 ÷ 50 = £200
• Total expected cost: £197 + £200 = about £397

On these assumptions, BNPL is cheaper (£250 vs about £397). With a lower borrowing rate or very reliable customers, your own terms could win. The point is to compare like for like: fee versus financing cost plus expected bad debt and admin.

B2B BNPL vs trade credit vs factoring vs dynamic discounting

Option	Who funds it	When it is arranged	Who carries credit risk	Typical cost to supplier
Own trade credit (net terms)	Supplier	When the account is opened	Supplier	Financing cost, admin and bad debts
B2B buy now pay later	BNPL provider	At checkout or on the invoice	Usually provider (check recourse)	Percentage fee per order
Invoice factoring	Factoring company	After invoices are issued	Supplier (recourse) or factor (non-recourse)	Discount fee plus service charges
Dynamic discounting	The buyer itself	After invoice approval	No third party; buyer pays early	Discount given for early payment
Invoice financing / line of credit	Lender	Facility set up in advance	Supplier	Interest and facility fees

Factoring is the closest relative. Our guide to invoice factoring explains how selling issued invoices works and when recourse applies. Dynamic discounting is the buyer-funded alternative, where a cash-rich customer pays early in exchange for a discount. And if you prefer a revolving facility, compare invoice financing with a line of credit.

How invoices work in a BNPL transaction

The supplier is still the seller, so in most cases the supplier still issues the sales invoice and accounts for any VAT, GST or sales tax. What changes is the payment instruction. The invoice should tell the buyer clearly:

• That the invoice is being paid through the named provider.
• The provider's payment details or link, not your own bank account.
• The due date under the provider's term, which may differ from your normal terms.
• A reference the provider uses to match the payment.

Some providers generate invoices or statements on your behalf, while others ask you to upload your own. Agree which document is the tax invoice so the buyer does not receive two "invoices" for one order and pay twice. If you create your own, the free invoice generator builds a PDF in your browser and lets you put the provider's payment instructions in the notes field. It does not offer credit, take payments or connect to BNPL providers.

In your books, record the sale at the full invoice value, the provider payout as cash received and the fee as a finance or selling expense. That keeps revenue accurate and makes reconciliation easier.

Pros and cons of B2B buy now pay later

For the supplier	For the buyer
Pro: cash within days instead of 30 to 90 days	Pro: time to sell goods or finish a project before paying
Pro: credit checks and collections handled by the provider	Pro: quick approval without a bank loan application
Pro: can raise conversion and average order size	Pro: often no cost within the standard term
Con: a fee on every financed order	Con: late fees or interest if repayment slips
Con: less control over how your customers are chased	Con: another creditor to manage alongside suppliers
Con: possible clawbacks on disputes in recourse programs	Con: credit limits may be lower than hoped

One relationship point deserves attention. When a buyer pays late, the provider, not you, will contact them. Ask how the provider communicates with overdue buyers, because a heavy-handed collection process can damage a customer relationship you spent years building.

A typical B2B buy now pay later scenario

Picture a small packaging wholesaler selling to independent cafés. Each café orders a few hundred pounds of cups and boxes every month and asks for 30 or 60 days. Before adding a BNPL option, the wholesaler either demanded card payment upfront (losing some orders) or offered net 30 to trusted customers and chased the rest. After adding a B2B buy now pay later option to its online trade store, new cafés can choose 30 or 60 days at checkout, the provider approves them in seconds, and the wholesaler receives the order value minus the fee a couple of days later.

The wholesaler still sends its normal VAT invoice with each order, but the payment section now names the provider and its reference rather than the wholesaler's bank account. Long-standing customers who always pay on time keep their existing net 30 account, because the wholesaler does not want to pay a fee on orders that carry little risk. That mix, with BNPL for new and unknown buyers and in-house terms for proven ones, is a common way to control cost.

Where B2B BNPL fits in the bigger picture

B2B BNPL is one example of embedded finance: credit offered inside the purchase flow rather than through a separate bank application. Our article on embedded finance in invoicing covers the wider trend, including payments and financing built into invoicing and ecommerce tools.

It suits suppliers who sell to many small and mid-sized business buyers, have repeat orders of moderate size and lose deals because they cannot offer terms. It suits less well when margins are very thin, orders are huge and bespoke, or buyers are large corporates that pay reliably on their own long terms. For those, a clear net 60 or net 90 policy or early payment discount may work better.

Questions to ask a B2B buy now pay later provider

• What is the fee for each term length (30, 60, 90 days)?
• How quickly are payouts made, and is faster payout extra?
• Is the program recourse or non-recourse? What happens in disputes, returns or fraud?
• What credit limits do buyers typically get, and what happens when one is declined?
• Which countries, currencies and industries are supported?
• Who issues the invoice, and how are partial shipments and credit notes handled?
• How does the provider collect from buyers, and how does it treat late payers who are also your customers?
• Are there monthly, setup or minimum volume fees?

Implementation checklist

• Calculate your current cost of offering terms: financing, admin and bad debts.
• Get written quotes from at least two providers using your real order sizes.
• Read the recourse, dispute and returns clauses.
• Update your customer credit policy to say when BNPL, prepayment or your own terms apply.
• Add the provider's payment instructions to your invoice notes or template.
• Set up accounting entries for the gross sale, net payout and fee.
• Tell your sales team how to explain the option to buyers.
• Review approval rates and fees after three months.

Common mistakes

• Recording only the net payout as revenue. Revenue is the full sale; the fee is an expense.
• Leaving your own bank details on BNPL invoices. Buyers may pay you instead of the provider, causing messy refunds.
• Ignoring recourse terms. A cheap rate can hide clawbacks when goods are disputed.
• Assuming every buyer will be approved. Keep a fallback payment option.
• Comparing fees to zero. Your own terms are not free; include financing costs and bad debts.
• Duplicate invoices. Agree whether you or the provider issues the tax invoice.

If buyers in the UK pay late on your own terms, statutory interest may be available under the late commercial payments rules on GOV.UK. For more on getting paid, browse the payments articles. Provider terms and regulation change, so verify details before signing an agreement.