Should I Pay My Vendor Using My Credit Card?

There is a ‘super power' that lies unutilised in the wallet of an entrepreneur. While its uses are known to many, Fintech-led innovations have NOW made hitherto impossible use cases possible for business owners.

The employment pillars of our country - the SME business owners run from pillar to post to work towards bridging their working capital gap, usually reaching out through middle men who are leveraging their proximity to financial institutions or by borrowing at exorbitant rates from unorganized lenders or emerging NBFCs playing the inclusion game.

In most cases, the organized lending segment finds their ticket sizes too small, and the relative effort to service as significantly high - usually making these SMEs provide a lot of information without visibility of timelines or a guarantee on actual funding. As a result, they have to pass up on the available ‘early payment' discount offered by their suppliers or in some cases pay exorbitant fines due to missed GST payments. Everyone agrees that this is no way to treat the hardworking SME entrepreneurs, who are the cornerstone of our economy, but till now there was no EASY solution in sight.

The BharatNxt App now enables the SME entrepreneur to use his ‘super power', the humble Credit Card in his wallet to pay vendors, compliance related expenses (gst, epfo etc.), office rentals etc. as a seamless bank transfer to any recipient's bank account. This facility gives them the much needed, breathing room needed to bridge working capital gaps.

Timely and/or early payment to vendors unlocks the below benefits for the SME buyers -

• Early Payment Cash discounts from suppliers
• Preferred buyer status (especially when disrupted by Covid waves)
• Prioritization for delivery of materials
• Preferred pricing
• Intangibles like ‘preferential' support

In addition to the benefits available from the supplier, the financial institution and payment app provides these incremental benefits, over and above the ones mentioned above, namely -

• Reward points
• Tier based rewards that offer preferential services at airports, waiving off on Credit Card fees, access to golf courses etc
• Cashbacks offered by BharatNxt for the transactions performed
• Scheduling bulk payments to vendors by uploading payment files

In cases where there is separation of ownership/financials between company and promoter, the entrepreneur can make a lot of these payments on their cards, while claiming reimbursement from the company. This allows these smart entrepreneurs to earn these rewards and lifestyle privileges by passing these transactions through the Credit Card.

In a nutshell, this becomes a win-win-win for all parties concerned. Here is the value that it creates for all parties in the ecosystem -

• Banks get more spends on their allocated Credit Card limits
• Buyers / SMEs get easy access to capital
• Suppliers get paid early and have an ability to receive payments, without bearing the costs associated with setting up a payment gateway or POS and resulting transaction charges

Business Payments in India are truly being disrupted through such innovations!