Consumer financing companies allow customers to buy something they otherwise might not be able to or might not want to pay for with their own money. But what are the consumer financing benefits for business?
When a business offers financing options to its customers, either with their own money or funds from a bank or lending institution, it’s usually called “consumer financing.”
For business owners, it increases sales and optimizes cash flow. Other than that, there are a few more ways to consider consumer financing for businesses. So, when providing financing options to your consumers, there are a lot of considerations you should make.
How Consumer Finance Helps Your Consumer & Your Business
There’s nothing that discourages clients more than the price of goods and services especially, those who are prepared to make a purchase. In these circumstances, providing customer financing programs can be a very effective strategy to increase sales and profits. You can help your customers buy more goods by offering a greater variety of payment alternatives.
When consumers have greater freedom to buy what they need and want, they feel taken care of. If you offer customer financing options, it facilitates quicker and easier payments in addition to providing funding. For businesses that may benefit from referrals, this results in happier consumers, which is a big plus. Furthermore, your clients are inclined to recommend your business to friends and family as opposed to competitors that demand full payment.
Why You Should Offer Consumer Financing to Your Consumers
By providing clients with the freedom to make regular loan payments that fit within their budget, consumer finance programs can help your firm close more sales. One of the biggest obstacles to closing a transaction is a high buying price, which you may get around by bringing up financing possibilities early in your sales interactions.
Consumers value financing because it increases their purchasing power and lets them acquire the exact item they desire without having to pay the entire cost upfront.
For example, when it comes to financing for coaching programs especially if you’re looking to promote your course to those who can’t afford high-ticket prices. With customer financing, coaches can empower their clients to have a higher purchasing power, which boosts sales.
So, for high-ticket courses or other fields, businesses that provide financing can make a lasting impression since you’re lowering the barrier of entry for consumers through consumer credit.
Benefits of Consumer Financing for Your Business: Should You Go Ahead?
Whether you’re a small business owner or part of a larger enterprise, you may find that there are many benefits of consumer financing such as motivating customers to finish their purchases, increased customer satisfaction, and overall improvement in sales as well as revenue.
Here are some advantages of consumer credit you should consider if you want to introduce customer financing options:
Drives the Sales Process
When you provide them with a quick and simple payment option, you’ll see a big improvement in conversion. By offering flexible financing and payment choices, you can close deals more easily. This makes sure that you meet your customer’s needs while also getting a faster payment.
Attracts More Customers
More often than not, customers are forced to pick between convenience and affordability. especially when they have to make a sizable upfront payment.
Giving them the option to spread the cost of their purchases over time will help you get more customers onboard. So, offering customer financing can decide whether you close a deal or lose a customer.
Boosts Sales
Many consumers don’t want to or can’t afford to buy high-ticket items up-front. In the short term, retailers can lower the cost of their purchases by enabling customers to conveniently split their amount into many payments. This allows businesses that provide consumer finance programs to see an increase in sales, as consumers are not bound by their finances.
Increases the Value of Sales
When you provide loans to your clients, you can expect an increase in average order value. This is because buyers can purchase the desired goods rather than settling for a cheaper alternative.
At times, customers are unaware of how much exactly they qualify to borrow since they don’t know their true purchasing power. For example, a customer looking to fund a $200 course might be able to get a $400 ticket that has better course material or more benefits.
So, you can simply demonstrate to clients how a small increase in their monthly loan payments can enable them to obtain what they desire to help increase transaction sizes.
Improves Loyalty, Trust & Referrals
Many customers are encouraged to return and make more purchases when you offer customer financing. This means that your customers will probably choose where their shopping experience has been easier given the option between those that don’t offer consumer finance and those that do.
Customers are more likely to stick with you when you provide them with customer service that benefits them. After using the customer financing programs you offer, your consumers will value the freedom that comes with it. So, they are more likely to use it again in the future for any other services they may require.
Moreover, your clients will spread the word to their family and friends if they’re happy with your services. This allows you to expand the reach of your business without spending more money.
Promotes Fast Payments & Increases Cash-Flow
One of the main advantages of consumer finance for business owners is that the lender bears all of the payment default risk and you receive full upfront payment for the purchase as soon as the loan is approved. In fact, the approval process doesn’t take much time either.
You can also improve the predictability of your cash flow since it’s much simpler when you know how much money you should expect to make each month. This can be helpful for your financial planning and decision-making if you anticipate that a certain month or quarter will likely be tight.
So, by working with a third-party lender, you can also increase the cash flow of your company. You will get the entire purchase price in your bank account a few business days after the lender authorizes your customer’s loan. That guarantees that your firm doesn’t take on any financing-related risk in addition to assisting your organization in maintaining a healthy cash flow.
Helps Your Customers Build Credit
Since other retailers won’t allow any other financing options, clients are encouraged to stay loyal customers until they discover something better elsewhere by being able to obtain financing.
So when they make regular payments, they can build their credit with you. Moreover, as they keep on improving their credit score, they’ll also have the ability to apply for larger loans.
Enhances Customer Satisfaction and Retention
Businesses can increase client loyalty and draw in new business by offering customer financing options. When you ensure customers have access to the necessary goods and services, they’re more likely to come back to your business as they trust your service.
Increases Overall Revenue
Customers who use financing don’t have to worry about not being able to pay. So, having control over their finances gives them the confidence they need to not only make the purchase at once but also come back to you as a devoted customer down the road.
So, by creating a great client experience, you can boost the possibility of future purchases, and grow your revenue.
Which Consumer Financing Option Should You Choose to Offer Financing to Your Customers?
As you already know, there are many benefits of consumer finance for both businesses and consumers. You can close more sales and help your clients in getting exactly what they desire without going over budget.
There are many types of consumer finance options that you can take advantage of. We’ve listed some popular consumer finance examples for you to take a look at:
Buy-Now Pay Later Options
Repayment options, such as Buy Now Pay Later (BNPL), have no interest because the loan is repaid fast. It allows consumers to buy something up-front while paying the loan in installments later. Typically, they’ll have to provide collateral in case of default, however, it can be a convenient option.
For example, if you’re thinking of financing for coaching programs, your clients can buy your high-ticket coaching ticket upfront and they’ll have the flexibility to pay for it at a later time. This is not only beneficial for your business but for the consumers as well.
Personal Loans
Your customers can use a personal loan to buy nearly anything such as consolidating debt or paying for a significant one-time expense. They can apply for this loan from a bank, credit union, or internet lender.
Most of the time, the lender will give them the money all at once if the personal loan application is accepted. However, certain lenders will transfer funds to your business directly especially if the loan is being used to consolidate debt.
Credit Cards
One easy approach to getting paid upfront and letting customers pay over time is to accept major credit cards. You can also help your clients to apply for specific credit cards with help from third-party lender companies. But there’s an extra cost attached to having credit cards.
Regardless of which consumer financing option you choose, make sure that at the end of the day, you’re able to satisfy both your and your customer’s needs.
Bottom Line: Should Businesses Offer Consumer Financing Options?
Now that you know about the consumer financing benefits for business, it should be a simple choice for you.
With consumer financing programs, you can guarantee that more consumers can afford goods and services. This will increase customer satisfaction, while also making sure you have a steady stream of income.
When clients are pleased with the services provided by a business, they are more likely to stick around and recommend you to their friends and acquaintances. So, your business will keep on growing.
In the end, it’s important to remember that in the long run, you should be focusing on your business goals, but also trying to make sure you improve your customer journey.
