What Exactly Is Customer Financing?

Customer financing allows customers to purchase goods or services by opting into a payment plan. The merchant can receive full payment up front from the customer, similar to a credit card. The consumer receives the product immediately but must pay over time. Typically, the customer is charged interest on the loan. Finding techniques to attract and maintain customers is the second step after launching a business. Of course, in order to do so effectively, you must tailor your business to your customers’ needs, desires, and budget. Having said that, depending on the type and price of your product, offering consumer financing could be a fantastic method to boost sales and customer loyalty. How customer financing boosts sales conversion for businesses is a key consideration for companies looking to optimize revenue. Instead of paying the full price of an expensive product up front, consumer financing allows them to pay using an accessible payment plan. In this approach, customer financing is intended to move customers from simply looking at and considering purchasing your product to actually buying it. Small businesses and larger brands alike provide consumer financing in order to turn more visitors into buyers. As a result, if this sounds like something that would help your business, you might be asking, “How do I give financing to my customers?” We’re here to assist you. We’ll go over your customer financing options and whether you need to offer financing to customers at all.

How to Make Financing Available to Customers

As previously said, customer financing provides solutions for customers who wish to purchase your goods and services but cannot pay the full price up front. By using a loan to create a payment plan, a $5000 item, for example, becomes available to your customer for twenty $250 installments (plus a small interest rate). By providing financing to your customers, you essentially make your items or services more accessible to them. How to structure affordable payment plans for customer financing is essential for businesses aiming to maximize customer accessibility while maintaining profitability. Offering finance to clients promotes sales conversion and customer loyalty on the business end. According to one study, providing consumer financing options boosts a customer’s average order amount by 15%. Also, 93% of the customers in this study who used credit options said they would do so again. As a result, if you believe that consumer financing could improve your small business, you should learn how to offer financing to your customers. In general, there are two approaches to providing consumer financing. The first alternative is to do your own credit checks, arrange financing, and oversee payment collection. This method, on the other hand, takes a long time and comes with the legal responsibilities that come with using consumer credit information. The second alternative is to use a third-party organization to provide finance to your consumers. Working with a third-party provider allows the firm to make credit offers and collect consumer payments, reducing time and taking some of the legal concerns away from your business. Since the latter is likely to be the best option for most firms, let’s go through how the process works. Here’s how you offer financing to customers while using a third-party provider:

1. The customer first sees a product or service they want to purchase.
2. The buyer will then ask for financing because they cannot afford the full price but wish to purchase the items. You’ll want to make sure you’ve clearly advertised that you provide customer financing so that prospective buyers are aware of this option.
3. Your customer will know whether they have been approved or declined for financing within seconds. If the customer is approved, they will get the funds quickly.
4. Your consumer will receive the product or service right away, but they will repay the finance provider in installments.
5. Unless the finance provider offers a promotion, the customer will typically be required to pay interest.

As you can see, the process of providing consumer finance is actually very straightforward. If you’d like to explore these financing solutions further, watch a demo to learn how HelloRates partner financing works or book a call to explore customer financing strategies for your business. Ready to take action? Start offering customer financing to attract more customers today and watch your business grow!