05 April 2022 • 16 min read
Ship Now Pay Later financing option now available
At a time when shipping costs are skyrocketing to record highs for reasons well known, the logistics industry is slowly embracing Ship Now Pay Later (SNPL) financing option akin to the retail realm’s Buy Now Pay Later (BNPL). SNPL enables businesses and exporters to avoid paying total freight charges at once by offering easy repayment options up to 90-day credit cycles, thereby optimizing the cash conversion cycle to make crucial decisions on new products investments, hiring, and expansion among others. Read on to know more about SNPL.
At a time when exporters are facing peak shipping costs, the logistics industry appears to have taken a leaf out of the retail world’s Buy Now Pay Later (BNPL) mechanism. BNPL isa point-of-sale (POS) financing option which is growing at a double digit rate, enabling customers to buy the products who otherwise could not have afforded though they were interested in buying.
This zero-interest short-term financing option empowers customers to make purchases now and clear those bills later in a predefined timeframe, subject to some conditions for the customer. In similar fashion, Ship Now Pay Later (SNPL) has emerged in the shipping industry.
SNPL could emerge as a major relief for shippers considering the exorbitantly high ocean carrier prices ruling the industry amid Coronavirus pandemic and container shortage. Ship Now Pay Later mode temporarily frees exporters from paying all the shipment costs at once, giving them a leeway to clear those bills at a later date which is comfortable to all the stakeholders.
InIndia, Cogoport, a six-year-old new age company is powering small and medium enterprises (SMEs) to go global, including enabling firms to import, export and make their trade easy by blazing a trail in SNPL space with its Pay Later offering.
Cogoport’s Pay Later, India’s pioneering SNPL offering
Cogoport’s Pay Later is an easy route for SMEs and interested firms to procure instant credit through a completely digital process, where you can effortlessly track purchases, repayments and transactions history on a simplified dashboard.
All authorized parties can book shipments via Cogoport for their export consignments and keep a track of their payment history, credit limit related information and other important details on one single dashboard provided by Cogoport. Cogoport brought forth Pay Later in collaboration with its third party lending partners which takes one business day to turnaround an application.
Easy sign up process for Pay Later, no need of credit card info
It is an easy one time set up process which lasts about half an hour without the requirement of furnishing credit card details. On completing the setup, an approved SMEs or firm can start availing Cogoport’s SNPL option Pay Later at the time of booking a shipment via Cogoport.
Pay Later’s key benefits
- Cogoport’s Pay Later is an excellent source of alternative funding for SMEs and firms at a time when there is reduced use of credit from traditional banking sources.
- Offers lower implied cost of funding for fiancé raised against a stronger buyer and credit rating.
- Pay Later offers working capital optimization and better cashflow forecasting along with flexibility.
- It optimizes and shortens cash conversion cycle, giving flexibility for the SME or business to easily pay for its suppliers, workers and employees. Short cash conversion cycle creates financial stretch SMEs.
Basic documentation to set up PayLater
At the time of registration, Cogoport’s Pay Later SNPL programme requires the interested company’s Permanent Account Number (PAN), Aadhaar, GST certificate, MOA/AOA and a few more financial details, including the company director’s PAN, Aadhaar number and photograph.
Robust information security
All information, including financial details shared with Cogoport are safe and secure considering the company adhering to globally recognised and certified data security standards with the strongest encryption, including complying with data security standards mandated by the Reserve Bank of India (RBI), India’s central bank.
Pay Later offers generous 90-day repayment credit cycle
Unlike most international SNPL programmes which offer 15-day, 30-day and 45-day credit cycles, Cogoport’s Pay Later offers a generous repayment period of up to 90days for an invoice raised against the approved limit depending on eligibility.
Budding SNPL international landscape
Ship now pay later is still not as widely adopted a financial solution as BNPL for exporters but some players are already functioning in this arena who include Hapag– Lloyd, PayCargo Capital and TranMazon.
Hapag– Lloyd Canada is offering an SNPL option through PayCargo Line of Credit and credit card option for easy payment. Under this option, the shipping line’s recognition of an exporter’s payment will happen faster and the subsequent release of his cargo will also happen faster, injecting speed and efficiency in the processes and removing hidden costs or personal credit checks.
TheGerman carrier has teamed up with Paycargo Capital, a fintech company serving transportation and logistics businesses with its solutions to rollout SNPL services. Paycargo is an online payment platform which enables shipping and cargo industry customers to move their funds and payments information to their freight supplier and release cargo at a faster pace, including having the ability to use credit cards as an option to pay.
Process of PayCargo credit solution through Hapag – Lloyd Canada
It is a five step procedure starting with:
- First qualify as a Paycargo user
- Apply for credit
- Get approved within 24 hours
- Execute documents through DocuSign
- Start using PayCargo Credit
For qualifying clients, the company can arrange up to $2.5 million for utilization in its system, even as clients will pay only for the amount of funds they use at the rate of 1 percent for a 15-day credit. There are also 30-day and 45-day terms available.
This arrangement offers the flexibility of using credit cards as a means to pay,Visa or Mastercard. Ultimately, the client or exporter will stand to raise efficiency and save resources in the form of eliminating cumbersome procedures and paper trail of manual check payment.
By freeing cash away from freight charges temporarily through SNPL, exporters can make decisions on investments in new products, expansion, hiring and others.
Paycargo Capital is a new age fintech company focusing on transportation and logistics industry by facilitating Ship Now Pay Later services. Though it does not explicitly brand its services as SNPL, they actually fall in that category. Its credit solutions help exporters to save time, make payable processes easy and smooth with excellent reporting capabilities, notifications and automatic updates.
However, it should be clarified that Paycargo is not a lender but only a fintech company which has devised simpler ways to review and take decisions on funding solutions for freight forwarders, customs house brokers and other non-vessel owning common carrier (NVOCC).
Marries credit seekers & providers in the logistics realm
By virtue of not being a lender and a mere fintech company, it plays the role of bringing together and marrying businesses in need of credit and logistics providers such as ship, aircraft and truck players who can provide credit.
Exporter scan avail credit between $50,000 to $50,00,000 in the form of the three credit cycles of 15-day, 30-day or 45-day to pay their ocean freight, air freight, cross border freight, warehouse fees, customs fees and other transport related costs.
Businesses can apply for line of credit to utilize it within the company’s system for paying transportation and related vendors. Using line of credit enables exporters to get their cargo released as soon as possible, get a credit decision without obligation and also not affect one’s credit score.
It in turn provides this credit for businesses to book cargo on ships, aircraft and trucks, and at the same time pays the credit providers (logistics players)immediately to release the cargo as soon as possible.
Mode of Paycargo Capital functioning
The fintech company offers 15-day, 30-day and 45-day credit cycles. Let’s take the case of 30-day credit cycle to understand how it works. On day one, exporter makes shipment payment to the logistics provider through Paycargo system. The fintech company immediately informs the logistics players so that the cargo can be quickly and safely released.
On day two, the vendor gets the payment from PayCargo System and on day 26, the payer or exporter will receive an alert that the payment and related fees will be processed from his bank account. On day 29, Paycargo deducts the right amount of funds from the bank account of the payer and restores his available credit balance to again avail shipments.
- Completes an exporter’s credit review within 24 hours.
- Credit comes handy to manage working capital corresponding to the size of a business, specially designed to power maritime and air cargo payments.
- Minimum credit starts from $50,000 while larger companies can also avail credit upwards of $5,00,000.
- Credit cost is determined by the credit review and the amount requested for.
- Exporters can pay any vendor (logistics provider) available through the fintech company.
TranMazon is a North American third-party logistics (3PL) company which also offers Ship Now Pay Later services. Similar to otherSNPL players, TranMazon, a delivery partner to e – commerce powerhouse Amazon offers SNPL services under 15-day, 30-day and 45-day credit cycles.
Unlike other players, this American company does not charge any fee on the credit which ranges from $1,000 - $1,00,000 but requires the dues to be cleared as per the plan agreed to. It offers a line of credit after reviewing the creditworthiness of an applicant, including raising it based on the payment history.
According to the logistics company, its SNPL services will help businesses to free cashflows and open a line of credit to pay based on usage. It offers 30-day credit cycle known as Net 30. Net refers to the number of days following the SNPL delivery, after which the business or exporter should clear his dues in full. If a shipment service was delivered on July 1st and the invoice says Net30, then the client has to clear his bill by July 30.
In conclusion, SNPL option currently looks to have been widely embraced by air cargo operators than shipping lines. In India, Cogoport is doing pioneering work to popularize SNPL financing option, especially aimed at SMEs and smaller exporters who lack the financial muscle of bigger enterprises. With maritime players like Hapag – Lloyd Canada offering the shipping industry’s equivalent of BNPL through SNPL, ocean freight players are taking baby steps into this space which looks poised for greater penetration in the future.