Consumer financing is one of the biggest tools people have for making large purchases. Furniture, automobiles, electronics and sporting goods are just some of the main items people prefer to finance instead of buy out-right.
As a business owner, your ability to extend financing options to you end market can help you boost sales, improve customer loyalty and build a steady clientele. At the same time, you’ll be offering something almost every customer wants: an easy payment method.
You may be thinking: my business is too small to offer in-house financing. Although this is a common perception among small business owners, it couldn’t be further from the truth. It doesn’t matter how “big” or “small” your company is. If your business model can benefit from financing, you can make it happen. Through the power of technology, your business can get set up for consumer financing quickly and easily.
Why Consumer Financing Makes Sense for Your Business
Financing is a powerful business tool because it gives customers more flexibility. Financing allows your customer to divide expensive purchases into affordable monthly installments. Rather than be forced to pay for the entire product upfront, consumers have the option to make equal installments over time to cover their costs.
From the business point of view, financing ensures you don’t lose a potential customer due to large upfront payments they cannot make. This is especially useful when converting customers who are on the fence about doing business with you because of a large upfront payment.
From the customer’s point of view, financing gives them the ability to buy what they want using a payment plan that works for them.
There’s research to back this up. FitSmallBusiness.com published data that shows consumers are more willing to make additional purchases from a business that offered them financing. Nearly half of consumers are also more likely to shop at retailers that offer financing.
How Consumer Financing Works
Setting up your small business with a consumer financing solution is a lot easier than you think. Contrary to what you might think, your business is NOT offering the financing. Instead, you are doing business with a third-party financing company that will pay you directly for the product your customer bought from you. The financing company makes money off the interest rate they charge your client.
Below is a step-by-step process illustrating exactly how customer financing works.
- A customer wants to purchase a product from your business.
- Your customer applies for financing online or mobile device. If you have a physical store location, this can be done on site.
- Your customer finds out almost instantly whether they’ve been approved and for how much.
- The financing company pays you directly for the product your customer purchased. This includes the cost of the product, taxes, extended warranties and installations, where necessary.
- Your customer takes the product home and begins making regular installment payments to the financing company.
By working with the right service provider, you can maximize the probability that your customers qualify for the loan. Although these qualifications differ based on company, the financing industry is highly competitive right now. This means you are likely to find a solution that meets your specific needs.
Although there are other ways your business can offer in-house financing, no other program provides the level of flexibility for you and your customer.
How Red Door Capital Can Help
Red Door Capital Group’s consumer financing technology helps small businesses extend financing options to their consumers. This option is especially beneficial for industries such as medical services, home improvement, consumer good, water filtration systems, power sports and many others.
By using our technology, you will be able to process your customer’s loan application digitally. All applications are made through an online portal that provides an instant credit decision and funding within 48 hours. Red Door Capital can also ensure a highly competitive interest rate for your business.
Consumer financing doesn’t just boost sales, it increases your close rates and helps your business solve cash flow issues.
If you’d like to be able to let customers finance goods and services being offered, contact us today.
Consumers Love Incentives
At the end of the day, consumer financing solutions will help you attract more people to your business. Consumers love incentives, and will be instantly drawn to features that will make their lives (and their payments) easier.
Research shows that more than half of consumers want personalized incentives, 50% crave future discounts and slightly less than half want to be able to apply online. (Thanks again to FitSmallBusiness.com for the great data). Demand for online applications is expected to grow as consumers become more digitally savvy.
Once you’ve decided to implement consumer financing, it’s important to advertise it as much as possible. At this stage, it also helps to change your price tags. After all, an item is no longer just $500. It should also show the lowest installment payment on the price tag.
If you have staff, it’s important to train them on how to use the application technology. It’s equally important to incentivize them to offer your financing solutions.
More from Red Door
To learn more about small business solutions, be sure to bookmark the Red Door Capital Blog. We publish three articles every week giving businesses the competitive advantage they need to succeed.
Are you looking to address cash flow issues? Read 6 Common Cash Flow Problems and How You Can Solve Them.
Are you in the market for A/R financing? Check out Accounts Receivable Financing: Using Invoices to Unlock Credit.
If boosting productivity is on your radar, check out Ten Ways to Automate Your Small Business for Maximum Efficiency.
Jeff White (February 24, 2017). “How to Offer Customer Financing: In House Financing Without Breaking the Bank.” FitSmallBusiness.com.