What is point-of-sale financing?

Point-of-sale financing refers to the practice of offering purchasers financing options instead of paying in full and upfront at the point of sale. Point-of-sale financing gives consumers the flexibility to choose a program that works for their household budget and has the value of helping them get the service they need at the time the need arises, rather than dipping into their savings or deferring the purchase while they save up the money to pay.

A widespread example of point of sale financing is the vehicle financing contracts written to enable new vehicle purchases.  Many consumers do not want to or don’t have the option to lay out cash for the full contract value of purchasing a new vehicle at the time of purchase, and so financing helps the consumer to get a vehicle that suits their needs which they then pay for in installments described in the finance contract.  

Increasingly, offering point-of-sale financing has become a powerful tool for spaces such as the home improvement business where contractors are performing renovations or installations (such as roofing, pools and hot tubs, or HVAC).  If you’re still wondering why your business should offer financing to customers, then consider this: Helping customers arrange funding is an excellent way for a contractor to differentiate themselves from the competition by adding an extra layer of service, but the fact is also that it helps you to grow your business along the way. The reason for the growth is simple: it is easier for a customer to say ‘yes’ to a deal if you present it in a way that makes it affordable for them to get started right away. Let’s dig into how to make that happen.

How do you offer point-of-sale financing?

While there are some businesses whose financial position allows them to offer consumer financing contracts in-house, the simplest way to quickly get started without tapping into your own capital is by working with a third-party provider such as Financeit.  

Working with a third-party provider has several advantages:

1. Focus – The best point of sale finance companies to partner with are the ones that add as little work as possible to your already busy days. Working with a partner like Financeit means – approvals, collections and other work associated with offering point-of-sale financing is off your plate so you can focus on growing your business.

2. Security –Speaking of collections, the last thing you want to be doing as a small business operator is having to chase customers for payment. Working with the right point-of-sale partner guarantees you that you get paid quickly for your work upon completion of the job and leave the payment collections to someone else.

3. Relationship Handling – Consider these important statistics for a moment: a recent study noted word of mouth is directly responsible for 19% of all consumer purchases and influences as much as 90% of all purchases.  When you outsource your point of sale financing, you can better focus your efforts on taking care of your company’s greatest marketing asset – its customers.

Process makes perfect

Having a trusted financing partner in place is only the beginning. There are many great reasons why you should make point-of-sale financing part of your customer offering: it helps increase your transaction size, makes you more competitive, and even helps attract new customers.  The key to making this tool work well in your business is to take the time to understand your customers’ needs and to integrate the financing offering into your sales process.

Keep in mind that many folks postpone major or even urgent home improvement projects because they don’t have sufficient cash on hand to get the work done. In today’s age of instant gratification, it is more important than ever to educate customers about the credit options available that can help them get the work done sooner. This puts the onus on you, the seller, to help your customers understand different ways of addressing the expense of their project.  For example, to one person, that new roof may be a great deal at $10,000, but to another person, it’s only attainable at payments of $109 per month. Financing option allows you to complete the sale while taking into consideration each customer’s financial needs. 

Asking potential customers about their finances or how they intend to pay for the work can feel awkward, but this is an easy thing to avoid. As you’re presenting the customer with options for the job, remember to offer a financing option alongside every price.  For example, if you were pricing out the above roofing contract, you could say, “This option works out to about $10K, or around $109 per month.”  By doing this, you’re demonstrating that you understand that people have different needs, including how they finance home improvement projects, but your neutral presentation of the options allows the customer to make up his or her mind about what works best.

Boost your sales by offering your customers point-of-sale financing.