Dec 11 (Reuters) - Australian buy-now-pay-later (BNPL) firm Zip Co Ltd said on Friday it signed a deal with Facebook to allow small- and medium-sized companies to use its payment service for advertising on the social media giant's platform.

The option, which is currently being tested, will be offered to Australian companies and rolled out in stages.

"Partnering with Facebook is an important step not only in the expansion of Zip Business, but in helping small business owners capitalise on recent growth in the ecommerce sector," said Peter Gray, Zip's co-founder and chief operating officer.

Zip Co's business service lets small- and medium-sized companies pay everyday expenses without interest.

The Facebook partnership marks the second major tie-up for Zip Business, which launched in August with eBay, broadening the increasingly popular BNPL model of offering interest-free shopping loans almost instantly.

(Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Devika Syamnath)