By offering financing to customers, businesses can boost their sales, land larger contracts and increase their average sales transaction size. Financing allows customers to make regular, affordable payments toward the cost of a big-ticket item, instead of paying the full price up front. Cost is often the first consideration for customers shopping for a big purchase: they want to know if the product or service they want will fit within their budget.
By leveraging consumer financing, you can eliminate the sting of sticker shock for your customers and shift the conversation away from total costs. Instead, you can show customers how low monthly payments can allow them to buy exactly what they want. Financing allows you to re-frame the sales conversation, shifting the focus away from budget constraints to the value the purchase will bring.
What is Customer Financing?
Customer financing breaks down the total cost of expensive goods and services, enabling customers to make smaller loan payments according to a set schedule. Rather than paying the full retail price at the time of purchase, customers make regular payments on a monthly, bi-weekly or weekly basis.
In most cases, customers are charged interest as part of their loan payments. Interest rates vary depending on the terms of the loan, and in some cases, merchants will offer zero-interest financing as an incentive to potential customers.
Why You Should Offer Financing to Customers
Here are the top business benefits of offering financing options to your customers:
1. Increase your sales and average transaction size
Financing increases a customer’s purchasing power, making large purchases more affordable. Not only does financing make it easier to close a potential sale, but it’s also a powerful tool for upselling. You can demonstrate to customers how a small increase in their monthly loan payments can allow them to afford upgrades or additional products, without the need to offer discounts or other incentives. Financing can successfully boost your revenue: a study found that the average sales transaction size increases 15% for companies that offer consumer financing.
2. Be more competitive
Offering consumer financing can give you a competitive advantage, allowing smaller businesses to compete with big-box stores. Merchants can add additional customer incentives to further improve their competitiveness. You can consider offering promotional programs to sweeten the deal for customers, like payment deferrals, interest rate buy-downs or no-interest loans. These incentives can help you close sales and drive repeat business.
3. Attract new customers
Your business can attract new customers by offering consumer financing plans. If a prospective customer is shopping around for a big purchase, they may be more likely to choose your company over a competitor that doesn’t provide financing options. It can also help you earn repeat business, as consumer credit programs often motivate customers to return for future purchases. A study found that 93% of buyers that use consumer financing for the first time would use it again.
4. Get Paid Quickly
A common barrier that discourages small businesses from offering financing is that it can have a negative impact on their cash flow since business owners don’t receive the full sales price at the time of the sale. But by signing up with a third-party loan provider like Financeit, you don’t have to take on the risks associated with providing your own loan program. Once Financeit performs a credit check and approves your customer for a loan, you get paid the full sale price in your bank account within two business days. Your cash flow isn’t affected and you don’t need to worry about the risks if a customer falls behind on loan payments or even defaults on the loan.
How to Offer Customer Financing
Customer financing allows businesses to give their clients flexible payment options when they can’t afford the full price of a large purchase. The easiest and safest way to offer consumer financing is to use a third-party lending provider like Financeit. It ensures you get paid quickly and in full for all your sales, and it eliminates the risk of non-payment that businesses face when they offer their own financing programs directly to customers.
Most customers don’t know to ask about financing when they’re shopping for a large purchase, so it’s important that you always discuss financing options with prospective customers at the start of the sales conversation. Give concrete details about what they’re costs would be if they opt for a financing plan, rather than paying the full sales price up front. Financeit’s Payment Calculator helps businesses quickly and accurately quote on consumer loans.
By discussing financing options throughout the sales conversation, you can demonstrate to customers how a large purchase can fit into their budget, which helps your business boost its sales and increase the average sales transaction size.
Close more sales and get paid faster with financing. Sign up for Financeit for free or call us to learn more: 1-888-536-3025.