Business Loans | Blog
BridgePay: Alternative funding for business
By Jordan L|
January 31, 2023
When you’re on the hunt for alternative funding for business, trade credit might not be the first solution that comes to mind. But using trade credit – whether you’re selling to or buying from other businesses – is a convenient and effective way of solving the same cash flow challenges that would push you to apply for a business loan.
When most business leaders and accountants think about where they can turn to to get funding, they think automatically of The Bank. You know The Bank; it’s a brick-and-mortar legacy system that has become the de facto means through which most businesses apply for financing solutions. But, The Bank isn’t quite holding up to the evolving demands of the modern SME.
We already know that SMEs are losing interest in traditional business banking institutions and turning to alternative funding for business. You can read all about it here. But, before you go, we’ll bring you up to speed with the most important points. If you’re suitably au fait with why alternative financing is the favourable solution for SMEs, then skip right to our paragraphs on BridgePay to learn about how invoice financing can help your business weather cash flow disruptions.
Why SMEs are seeking out alternative funding for business
Big banks aren’t fast or flexible enough to accommodate SMEs
Historically, business banking has existed as a facility for cash management, transactions and, over time – a lot of time – access to credit. But these financial solutions are not as easily accessible as they need to be for most South African SMEs.
In fact, Luka Ivicevic, the fintech boy wonder who co-founded Penta (Germany’s largest SME bank) straight out of college, predicted in this 2017 LinkedIn article that business banks are going to become altogether obsolete. The gap between what SMEs need and what legacy lenders can offer is growing wider and wider.
“As this service gap increases and business banking continues to become quietly disintermediated, I wonder, will the Xeros and Quickbooks of the world eventually become the primary banking service of small-and medium-sized business owners?”
In a more recent article featured by Ventureburn, Bridgement Co-Founder and Chief Executive Daniel Goldberg confirms and elaborates on that prediction made by Ivicevic made back in 2017. The Xeros and the Quickbooks of the world are becoming the primary banking service of SMEs, but only when they are integrated with a non-legacy lending institution. Our own continent has provided ample opportunity for fruitful partnerships between fintech players.
Africa is fertile ground for fintech innovation
In 2021, Africa’s fintech enterprises accounted for nearly two-thirds of the $5 billion raised by start-ups during that year. “Africa’s financial services industry”, says Goldberg, “has capitalised on mobile penetration rates, using an almost all-digital approach to dealing with money. This is an innovative environment in which lenders can rethink how they go about lending.”
To deliberately misquote Plato, necessity is the mother of innovation. And, in Africa, there is a plentiful need for fast, flexible, and simple business funding solutions. This environment has proven fertile ground for rethinking legacy systems. Xero, Quickbooks, and Sage have digitised traditional administrative processes like accounting and invoicing.
Forward-thinking lenders integrate with these software platforms to access reliable information that can be leveraged to make quick, adaptable credit decisions free from cumbersome paperwork and indefinite waiting periods. Speed and simplicity are of the essence.
As an example, fintech expert Sigridur Sigurdardottir reflects on the success of the working capital loan solution. “If you think about it in the context of what it was, it would have taken a small business anywhere from two to four weeks to get a decision on working capital. That’s a long time for a small business. And now, all of a sudden you get a decision within minutes, and you have your funds in your account within 24 hours.”
Ultimately, this is what has driven more and more SMEs away from legacy lending institutions and turn instead towards alternative funding for business. The most valuable commodity for most SMEs is not money: it’s time and flexibility. Alternative lenders can offer a degree of speed and flexibility that is simply not possible for legacy institutions. No queues, no paperwork, and no locked-in payment plans.
Where does Bridgement fit into all of this?
We’re so glad you asked! Bridgement is a leading fintech credit provider offering simple finance solutions to South African SMEs. We know that the most valuable commodity for SMEs is not just money, but time and flexibility. After all, most SMEs don’t fail because their leaders lack passion or expertise – they fail because they are upended by the turbulence wrought by cash flow disruptions.
Interruptions to cash flow can spell out the end for SMEs that are prioritising growth. And, as we’ve just pointed out, appealing to legacy lending institutions simply takes too much time and effort to be a viable solution to your immediate funding needs.
Bridgement provides simple financing solutions to bridge gaps in cash flow, empower businesses to take on bigger orders, and equip them with the assets that they need to keep things running. Speed and simplicity are of the essence. It takes 2 minutes to apply for a Bridgement facility online and, once you’re approved, you’ll have access to credit within a matter of hours. By empowering business leaders to spend less time on banking and more time doing actual business, Bridgement isn’t just enabling growth, but nurturing it.
To this end, Bridgement offers a bouquet of products tailored to your needs. These include a Business Loan, Line of Credit, Invoice Financing, and – the star of this article – BridgePay, our trade credit solution.
BridgePay: the leading trade credit solution for South African SMEs
First things first – what is BridgePay?
If you have a grasp on the concept of Buy Now Pay Later, then you’ve got a handle on how BridgePay works. It essentially functions as a B2B BNPL solution, a flexible payment option that frees up cash flow for both buyers and suppliers. We’ll explain how it works from both perspectives.
BridgePay for buyers: buy now for up to R500k, pay over 12 weeks
Here’s a fictional use case for your consideration. Steve is an accountant working for an organisation that faces a seasonal cash flow drought. It happens every year; at year-end, cash flow slows to a trickle and it becomes Steve’s burdensome duty to figure out how the organisation is going to keep its monthly invoices paid for purchase orders and services rendered. Taking a loan out from traditional lending institutions has not proved effective. By the time the loan is actually approved, the month has passed and the invoices remain unpaid. The organisation’s accounts are now in arrears, and its relationships with its suppliers have suffered.
This year, though, Steve checked out BridgePay as an alternative financing solution to see out the seasonal cash flow drought. With BridgePay, the organisation can buy from their suppliers now and pay over 12 weeks. It’s a fast, flexible way to settle invoices.
How does it work?
Here’s a step-by-step guide to how someone like Steve would secure trade credit through BridgePay.
- Skip the line and apply online for BridgePay. It takes only two minutes, freeing Steve’s time up for a more satisfyingly productive day. Instead of queuing at the bank, Steve is exchanging fresh growth ideas over a cup of coffee with his superiors.
- The application is approved, and the organisation has access to up to R500 000 to pay one or multiple invoices. Now, all the organisation has to do is order direct from their suppliers as usual and send the invoice to Bridgement.
- When he settles the accounts with their suppliers, Steve selects BridgePay as his payment option.
- Once payment is approved, Bridgement settles the account upfront with their suppliers and the order is processed immediately.
- Because they work with a participating supplier, Steve’s organisation pays the principal amount back to Bridgement interest-free over 12 weeks. They can also settle the account early without incurring any penalties.
The outcome? Steve’s organisation buys the time that they need during a seasonal cash flow slow to settle its accounts and they maintain healthy relationships with its suppliers. Steve earns a commission and the organisation earns a competitive edge because they can keep working while the rest of the industry navigates the slow season.
Also, now that Steve’s organisation has qualified for BridgePay, they can use the same facility within their limits over and over again. No towering piles of paperwork, no long queues at the bank. Just fast and flexible trade credit. Simple as that.
Looking for a facility which can you give you more to work with than R500 000? You could access up to R5 million with our Business Loan or Line of Credit. If you’ve got even more questions, we’re ready to answer them all right here.
BridgePay for suppliers: offer your buyers a flexible payment plan and watch sales grow
BridgePay is a flexible payment solution that you can offer to your clients to boost sales and keep cash flow steady without taking on any risk. The benefits of a flexible payment system might appear more obvious for a buyer than they do for a supplier, but make no mistake. Offering BridgePay to your customers is a smart way to alleviate an administrative burden and give your sales a healthy boost.
Although most of the literature on payment plans like these concerns retail buy now pay later (BNPL) plans, contemporary research by McKinsey confirms that offering buyers a flexible payment plan increases conversion rates, boosts sales, and pads average order values favourably.
What are the supplier benefits?
When you implement BridgePay as a payment option, you can:
- Keep sales consistent, even when your clients are facing cash flow challenges (which, in turn, helps keep your cash flow streaming steadily)
- Stop chasing invoices and focus your time and energy on growing your business. We’ll settle your account upfront (less a nominal transaction fee) on your client’s behalf and collect repayments from them over 12 weeks
- Relieve yourself of the burden of credit and potential fraud – Bridgement will absorb the risk
- Delight your clients with the option to buy now and pay over 90 days
The flexibility that BridgePay offers works both ways. Your business shouldn’t have to face the same cash flow constraints as your clients. BridgePay can bridge that gap.
What are the buyer benefits?
Clients who settle their accounts using BridgePay can expect the following:
- Improved cash flow
- More room in the budget to make bigger orders
- Interest-free trade credit
- A more affordable payment plan for their accounts with you
- Faster, more flexible approval for repayment terms than other lending institutions
By including these benefits in your business with clients, you’re building better relationships that are as lucrative as they are long-lasting.
How does it work?
Simple. Just follow these steps:
- Apply to partner with BridgePay. Once you’ve been approved, you’ll be able to offer BridgePay as a payment option by including a link in your invoices, email, or online checkout
- Next, your clients can simply select BridgePay as a payment option, review and accept their payment plan, and voila. You’re done. No paperwork required.
- Once the payment plan has been approved, we pay you immediately (less one small transaction fee) so that you can fulfil the order. Don’t worry – the burden of risk is ours to carry.
- Set it and forget it. You shouldn’t be chasing up invoices, you should be running a business. We’ll take care of collection and we’ll never contact you for repayment if your client defaults.
What’s more is, once your client is approved for their BridgePay facility, they can use it again and again within their limits to make payments to you. You’ll never be ghosted by a client after their annual budget review ever again. BridgePay takes care of cash flow disruptions for you and your client.
The bottom line: alternative funding is better for your bottom line
Traditional lending services simply aren’t cutting it for South African SMEs anymore. Most businesses simply cannot afford the time and complexity that most traditional funding applications demand. It’s time that funding got fast and flexible. Simple as that.
Register for a BridgePay and get up to 90 days to pay your business invoices.
BlogThe role of accountants in SME funding March 22, 2023
If you read our heroic article about why it’s high time that we recognised the very essential (and very cool) role that accountants and business advisors have to play in their organisations, you might think that we’re harbouring an agenda to MAGA (Make Accounting Great Again, obviously). And you’d be right. All jokes and perfectly…
Blog | Business AdviceLooking to the future with cash flow forecasting March 16, 2023
Chances are when you woke up this morning, you consulted your phone for a few insightful metrics on the weather, the stock market, and the load shedding schedule (boo). Using past patterns to give shape to the future is part and parcel of preparing for every single day – deciding which coat to put on,…