Embedded Credit or Invoice Finance?

I’ve been at Kriya for over three years now and have grown through the ranks of our invoice finance teams, before starting work on our embedded credit offering. Seeing multiple parts of the business has given me a unique insight into the similarities, differences and benefits of each product. I’ve also spent time chatting to customers and really understanding the issues that businesses face and the impact the right kind of funding can have.

As you may know, both invoice finance and embedded finance (think: buy now, pay later options at checkout) help businesses improve their cash flow. On top of this they manage operational expenditure to improve their business growth. Below I’ll go through the main points for both products and what sets them apart. So if you’ve been wondering what the difference is between invoice finance and embedded credit, or B2B BNPL (buy now, pay later), read on.

What's Invoice Finance?

Invoice finance has been a tool companies have used to get paid earlier for their invoices for literally thousands of years. There’s even evidence of a form of invoice finance from the Romans! Essentially it’s an effective way of bringing cash flow forward by trading an invoice for a percentage of its cash value.

Kriya CEO Anil Stocker co-founded Kriya, then called MarketInvoice and later MarketFinance, specifically to help SMEs who were waiting up to 90 days for their invoices to be paid by big corporations. The company began in the shadow of the financial crisis, when the little guy was really being picked on and underserved by traditional financial institutions. By bringing invoice finance into the digital world, businesses could access funds faster and more easily than ever before. Since 2011, our digital invoice discounting has provided over £3 billion of credit and through it we’ve processed over £20 billion in payments.

Invoice finance (or selective invoice discounting as you may see it called) is a great way to advance large one-off or lumpy payments that your company is waiting on credit terms to be paid. Imagine the following scenario (it’s likely very familiar for many):

• Made up company, Event Seating Ltd, have secured a deal to provide chairs for the Queen's Jubilee. Terrific – what a contract to win! But, now the business needs to find 50,000 chairs from suppliers who want to be paid in 30 days. If they’re a new supplier, they may not give them any credit at all.
• As if that wasn’t frustrating enough, the government is only paying Event Seating Ltd for providing he chairs 45 days after the event. In short, they need to pay up after 30 days, but won’t get paid themselves for 45. What should they do?
• If the business went to a company like Kriya they could apply to get 90% of that invoice paid on Day 1 and pay their suppliers on time. The remaining 10% would get to them once the customer pays up after 45 days!
• There’s a small fee to use the facility, but their cash flow is strengthened and they can keep working on different projects too. For example, the customer might pay 2.5% to get the money they needed on Day 1 instead of Day 45.
• The account is set up, managed and secured by the company who can now access funds faster.

What's Embedded Finance?

So, we know invoice finance works really well for big invoices and infrequent transactions (to save on admin), but what about if instead of being charged to get paid quicker I just wanted to have longer to pay for free?

This is where embedded finance comes in. Suppliers, marketplaces and enterprises can provide SMEs with longer to pay and more flexible options to boost their cash flow in a safe and secure way at checkout. This is something we’re now offering at Kriya.

Let’s look at how our example worked if they used a marketplace or enterprise that had enabled embedded finance options at checkout:

• Event Seating Ltd goes to a supplier who has embedded finance with Kriya at their checkout, allowing them to checkout online in seconds.
• Instead of getting 30 days credit they now have potentially 60 days to pay for the seats, or can even split the cost over 3 months interest free.
• Event Seating Ltd gets paid by the government before they even have to pay for the chairs, and can even smooth out their cash flow by paying a third each month.
• The supplier gets paid by Kriya as soon as Event Seating Ltd checkout, so they’re happy and have helped their customer make this big order happen!
• Event Seating Ltd checked out with the Kriya credit option at checkout. The embedded finance technology meant they could use the buy now, pay later option in seconds and count on their delivery arriving as usual.

What's right for your business?

By embedding finance within the checkout of enterprise suppliers and marketplaces, Kriya helps thousands of customers buy more of the goods or survive they need, when they need. We’re here to improve their cash flow and grow their businesses. While you have more choice over invoice finance as you can select which invoices to pay, with embedded credit a business would need to find a supplier that offered this functionality. But for smaller, frequent purchases that are starting to happen more and more online, embedded credit is the future of business payments.