Zip is rolling out a $150,000 line of credit to businesses as they grapple with a post-JobKeeper Australia

Zip founder Larry Diamond and Peter Gray.

• Zip has unveiled a new business line of credit, offering Australian enterprises up to $150,000 interest-free.
• The credit amount will incur a 3% fee if the amount isn’t repaid within 60 days or less.
• It marks a major move into the business market for the buy now, pay later sector as it eyes future growth.
• Visit Business Insider Australia’s homepage for more stories.

As some Australian businesses struggle to recover as government support winds back, they are being offered help from an unlikely place.

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Buy now, pay later platform Zip has announced on Thursday it will extend an interest-free line of credit, offering between $3,000 and $150,000 to eligible small and medium businesses.

Once activated, businesses can use the ‘trade’ account at checkouts and use it to pay Australian invoices, with amounts subject to up to 60-days interest free. Beyond that, they’ll cop a 3% fee, repayable in four instalments.

It comes a week after the federal government’s $70 billion JobKeeper program was tied up, returning the full burden of payroll to the shoulders of business owners.

“JobKeeper was a vital lifeline for small businesses throughout COVID, but now that the program has ended, small businesses will need to turn somewhere else for financial support. That’s where we come in,” business general manager Geof Alexander said.

The product will be available to businesses with an active Australian business, or company, number. They must generate at least $5,000 in sales a month and have been operating for a minimum of six months to qualify.

Zip claims applicants can be approved within minutes for smaller amounts and within 24 hours for the maximum $150,000 limit available, subject to its lending criteria.

“Cash flow, additional equipment, staffing costs, or simply getting a bit of extra capital to support your ambition are all small business needs that Zip Business can help with. We know this pandemic has been hard, but resourceful people thrive in hard times,” Alexander said.

It’s an interesting move from Zip, as the BNPL space begins to turn its gaze from the consumer market to business owners.

It follows on from rival Openpay, which signed a deal with Woolworths last year, facilitating trade accounts for the supermarket giant. It’s since become a standalone offering as it looks to offer a business platform to help simplify and automate invoicing.

“In this instance, we are a software as a service and it’s a business model that were really getting a lot of traction and interest around at the moment,” Dion Appel told Business Insider Australia.

“It’s not as capital intensive, and it’s pretty low risk, because we’re not providing the funding.”

Zip, by contrast, actually is offering funding direct to businesses with its trade accounts, and quite a bit of funding should they take it up on the $150,000 limit.

All of this naturally falls outside of the restrictions of the Credit Act, instead being subject to the sector’s own controversial voluntary code of conduct. While Zip has repeatedly defended its own checks and balances on customers, boasting that just one in 100 customers are late on payments, such a high limit is uncharted territory for the Afterpay competitor.

However, it may also mark an even bigger push into the B2B sector, with the crowded field desperate for new growth markets.

It’s a move that may greatly expand Zip’s reach into the business sector, but with a temporary freeze on business insolvencies now over as well, it would also appear to increase its risk.