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FinTech Mobilizes To Repair Construction's Biggest B2B Payment Pains
LinqPal is featured on pymnts.com
February 02, 2021
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Net terms are a staple in the B2B payments arena. Although the concept is designed to support greater control over cash flow — especially for buyers — in the construction industry, “net terms” doesn’t necessarily mean what it implies. For contractors that need to make materials purchases from vendors, payment practices usually entail a monthly deadline upon which all outstanding invoices are due, whether invoices were issued 30 days or three days before that due date. According to Yaser Masoudnia, CEO of LinqPal, which launched last month, this legacy B2B payments framework is just one example of the variety of legacy payment workflows upon which the construction industry relies. As he told PYMNTS, outdated and manual processes fail to address the biggest pain points for both materials vendors and contractor buyers, leaving plenty of room for friction and cash flow bottlenecks. Dual-Sided Pain Points When launching LinqPal, Masoudnia said he aimed to service both buyer and supplier pain points in the construction space, with companies on either end sharing more in common than they might initially think. “On one end, it’s designed to address the needs of the contractor, and on the other end, it’s designed to address the needs of suppliers because the root of the problem for both is the same,” he said. The continued tradition of a monthly payment deadline, for example, creates significant cash flow and administrative burdens on the contractor customer, who, as Masoudnia noted, often misses those deadlines because they are so busy. Letting go of a lump of capital on one date every month can also create cash flow pains. But this framework also adds friction for the supplier, he said, pointing to the challenge of having to chase down multiple outstanding invoices from a single customer all at once. There are several other key pain points in construction B2B payments that harm both buyers and suppliers. Masoudnia pointed to the use of commercial credit cards that can be particularly painful for both sides of a transaction. For buyers, contractors frequently have to relay card details over the phone, “four or five times a day,” he said. Suppliers, meanwhile, will have to manage tens or even hundreds of customer credit card details, and because they often lack a way of storing that information securely, will instead have to manually key in card details every time a customer wants to make a payment. And with the contractor community almost entirely made up of small- to medium-sized businesses (SMBs), Masoudnia said a lack of access to capital among these firms is also creating cash flow squeezes that negatively affect both buyers and materials suppliers. Financial institutions (FIs) often find these SMBs not credit worthy and are unable to understand the financial health of the business when taking into consideration factors like seasonality or the actual nature of the business borrower. The Value of the Mobile Device The construction space is no stranger to FinTech, with emerging solutions stepping in to tackle a variety of these cash flow and payment pain points. The problem with these tools, according to Masoudnia, is that they rely on back-office adoption and maintenance of a platform. “A massive portion of this industry is made up of businesses under 20 employees,” he said. “That means there is very limited back office. They don’t have anyone to sit in the back office to manage software. The only tool they have on hand is their phone.” FinTech solutions not only need to address the particular nuances of B2B payments in the construction space, but they need to be mobile-friendly in order to reach end users more easily. For LinqPal, that means support for vendors to upload invoices and have them sent via text message, allowing recipients to click a link and pay an invoice using stored card and bank account details from their smartphones. The company has also integrated a mobile-friendly financing solution to connect SMBs to working capital to pay for materials, an effort to address the pains of monthly payment deadlines and the resulting capital squeeze. Its financing offering takes into consideration the differences between business borrowers that may be plumbers or electricians, for example, each with different working capital needs. By combining mobile-friendly payment and working capital solutions, FinTech is able to meet businesses where they are and remedy cash flow bottlenecks that prove painful for both contractors and their materials suppliers. With so many players in this space made up of on-the-go SMBs, solutions must be agile, user friendly, and tackle the unique capital burdens that can bog down both contractors and vendors.
See the original article here. LinqPal has been rebranded as BlueTape.
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