In the US, around 78.6% of small businesses make it past 1 year. And at the 5-year mark, only about 50% are still around.
As you can see, it’s difficult to keep things going after a while. This may seem daunting, but there are certain steps you can take to ensure your company grows instead of fails.
To reach your business goals, you have to make it easier for your customers. While they might wish to buy from you, many may not be able to outright afford it.
So are you wondering about how to offer financing to customers?
In this article, we’ll give you a step-by-step guide on how to do so.
What Is Customer Financing?
First off, let’s make sure you understand exactly what customer financing is before you delve into it.
Customer financing allows consumers to make purchases on big-ticket items (or services) they wouldn’t be able to afford on a one-time payment. Normally, they’d just walk away, which is a lose-lose situation for everyone involved. Consumers don’t get what they want, and your business doesn’t grow.
Customer financing gives consumers an attractive option to get what they want immediately. They’d them make regular payments on a set schedule (this could a weekly, biweekly, or monthly payment plan).
The main benefit of offering customer financing is you don’t have to lose out when customers can’t afford to pay you all at once. Another advantage is you can charge a little bit of interest and make extra income off of that.
However, many companies offer zero percent interest rates to entice consumers to purchase their products or services. So you might want to think about having an introductory rate.
Benefits of Offering Customer Financing
Obviously, by offering customer financing, you can boost your sales and grow your business. When consumers don’t have to put the full amount down, this enables them to make larger purchases.
For example, Forrester studied how PayPal’s Bill Me Later function impacted sales for vendors. Those who offered that option had a 32% increase in sales. It also drove a 75% increase in the average order value (AOV).
Based on these numbers alone, customer financing will definitely help you expand your company.
But what else? Read on to find out more about the benefits you can reap from offering customer financing.
Get the Full Amount Upfront
If you offer the customer financing yourself, you’ll have to worry about not getting profit quickly and upfront. However, if you work with a third-party financing provider, that worry is eliminated.
All they have to do is perform credit checks and approve your customers for the “loan.” Once that goes through, you’ll get paid for the full sales price of whatever your customers have bought.
This means there’s no interruption to your cash flow, even if your customers are late or fail in making their loan payments.
Beat Your Competition
Whether your competition is another small business or a major brand, offering a customer payment plan can give you a significant advantage. In this case, you won’t necessarily have to have the lowest prices to get consumers to pick you over your competition.
When it comes to big-ticket items, the difference in prices between businesses will be pretty negligible. So consumers are looking for the most affordable option in terms of financing.
How to Offer Financing to Customers
The simplest way to offer financing to customers is to extend credit to them directly through your business. They’d initially put down whatever they could, then slowly pay the full amount to you.
However, despite this being a simple process, it can get quite messy. Not only will your cash flow be disrupted, but you run the risk of customers defaulting on their loans.
A way to avoid this headache is to work with third-party financing companies. Read on to find out how to do so.
Working With a Third-Party Financing Provider
First, you’d look for a third-party financing company that provides point-of-sale financing. Once you find one you like, they’ll have you adopt software or an app for processing sales.
Whenever your customers want to finance their purchase, all you have to do is have them apply through this software. The financing company will instantly check their credit score then determine whether or not they qualify for financing.
If your customers are approved, they can then move forward with the purchase. The financing provider will give you the full amount for the product or service.
What’s great about using a third-party financing provider is not only will you get money upfront, but they’ll also handle all aspects of the financing bit. This means you won’t have to worry about setting up payment plans and collecting money from your customers.
For this convenience, you’ll pay a small fee. You can decide whether it’s a monthly fee you pay to them or a certain percentage that comes off all of your sales. They can also charge the customers interest and make a profit off that.
Keep Your Customers Happy With Great Options
Now that you know how to offer financing to customers, you’ll be able to provide them with a much-needed service. Attract new customers, keep your cash flow, and get a leg up on your competitors by having customer financing options available. See your company do much better after introducing consumer financing that’s easy and accessible.
Would you like some additional funding so you can offer financing to your customers? Then apply with us now. You can receive these funds in as little as 24 hours!
Checking for pre-approval will not affect your credit score.