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Fintechs bet small businesses want consumer-style financing

  //business-finance.news-articles.net/content/202 .. ll-businesses-want-consumer-style-financing.html
  Published in Business and Finance on Friday, September 5th 2025 at 12:56 GMT by American Banker
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FinTechs Are Bringing the “Buy‑Now‑Pay‑Later” Model to Business Funding

In a landscape that has long been dominated by banks, a new cohort of fintechs is turning the BNPL (Buy‑Now‑Pay‑Later) model—once the preserve of consumer lenders—onto small‑to‑medium enterprises (SMEs). American Banker’s recent feature, “Why fintechs are emulating BNPL, EWA for business financing,” explains how companies are packaging flexible, short‑term credit into a product that feels more like a service than a loan. Below we unpack the key take‑aways, real‑world examples, and the regulatory backdrop that could shape this fast‑growing niche.

1. The Core Premise: Flexibility Meets Speed

Traditional bank loans require lengthy application processes, collateral, and strict underwriting. Fintechs, by contrast, use digital data streams—POS sales, online transaction histories, payroll data, and even real‑time inventory levels—to build a picture of a firm’s cash flow on the fly. That data, combined with machine‑learning models, allows for instant credit decisions and repayment terms that match the rhythm of a business’s revenue cycle.

The model is essentially a “pay‑later” feature for businesses: a company can take out a line of credit or a short‑term loan with no fixed payment schedule. Instead, repayments are made automatically as sales come in, much like how a consumer using BNPL pays installments based on their purchase history. Because the product is tied to actual revenue, the lender’s risk is mitigated by the borrower’s own performance.

2. From Earned Wage Access to Earned Revenue Access

The article draws a parallel between Earned Wage Access (EWA) and the new business model. EWA lets employees tap a portion of their earned wages before the official payday, giving them flexibility without incurring new debt. Fintechs now aim to give businesses “Earned Revenue Access” (ERA)—a form of working‑capital financing that unlocks the value of upcoming invoices or sales.

For instance, BlueVine and Fundbox offer “invoice financing” where a company receives a percentage of the invoice amount upfront and then repays once the customer settles the invoice. Meanwhile, PayPal Working Capital and Square Capital provide a “pay‑later” cash advance that is repaid as a share of the merchant’s daily sales. These products mimic the EWA experience: the business can use the capital immediately and pays only when the revenue stream is available, thereby avoiding fixed monthly fees.

3. Why Traditional Banks Are Watching

Although banks have begun to experiment with “Revenue‑Based Financing” (RBF) themselves—think JPMorgan’s “Revenue‑Based Lending” and Wells Fargo’s “Revenue‑Based Advance” tools—the fintechs’ speed and data‑driven underwriting give them a competitive edge. According to the article, banks are concerned about two things:

1. Regulatory Scrutiny – The rise of non‑bank lenders in consumer credit has prompted regulators to consider stricter oversight. If the same pressure mounts on business lenders, banks may find themselves forced to adopt fintech‑style technology or risk losing market share.
2. Capital Adequacy – Lenders who use non‑traditional data may be tempted to expand risk appetite beyond what traditional capital ratios allow. Fintechs can therefore attract capital from venture funds and private equity that are more willing to take on higher risk‑rewards models.

4. A Closer Look at the Market Players

The common thread? All of these platforms automate credit underwriting and use dynamic repayment terms that align with the borrower's cash flow. That means the borrowing cost can fluctuate with sales volume—a key advantage for seasonal businesses or those with variable revenue streams.

5. The Risks and the “Pay‑Later” Trap

The article does not shy away from the darker side of the model. Because repayments are tied to revenue, businesses may inadvertently take on more debt than they can manage if sales dip unexpectedly. Fintechs’ “no‑interest” branding can mask the true cost: fees often translate into an APR that is comparable to, or even higher than, a conventional small‑business loan.

Additionally, the data‑driven approach raises privacy concerns. Companies must disclose sensitive sales data to lenders, which could be misused if not protected adequately. Regulators are starting to take note, and the industry will need to adopt best practices for data security and transparency.

6. The Bottom Line

Fintechs are leveraging the consumer BNPL mindset—flexibility, instant access, and a frictionless experience—to solve a longstanding pain point for SMEs: obtaining working capital on terms that match cash flow. By digitizing underwriting and tying repayments to real revenue, these lenders have created a product that is both attractive to entrepreneurs and compelling to investors.

For traditional banks, the message is clear: either adopt a similar model or risk losing a growing segment of the market. For businesses, the choice will be between the long, rigid processes of banks and the nimble, data‑rich solutions offered by fintechs. The next few years will reveal whether this new “business BNPL” can survive the inevitable regulatory tightening or if it will simply evolve into a more regulated, hybrid model that balances speed with safety.

References

American Banker. Why fintechs are emulating BNPL, EWA for business financing. https://www.americanbanker.com/payments/news/why-fintechs-are-emulating-bnpl-ewa-for-business-financing (accessed 2025‑09‑05).