Maximizing Sales and Building Loyalty: The Benefits of Offering Customer Financing
As a business owner, it is important to find ways to increase sales and build customer loyalty. One strategy that helps achieve these goals is offering customer financing options. As consumers become accustomed to having a variety of payment options when making purchases, providing access to financing allows businesses to meet customer expectations. The ability to finance their purchases can also make it more likely for customers to make a purchase and return to your business in the future.
The Benefits of Offering Customer Financing
Customer financing is when a business extends credit to customers, allowing them to make payments over time instead of paying the full cost of an item upfront. This type of financing can benefit both businesses and consumers in a number of ways:
Increase in Sales
One of the most obvious benefits of offering financing is the potential increase in sales. When customers have the option to finance their purchases, they may be more willing to increase their purchase size. This can be especially beneficial for business selling larger ticket items, such as furniture or appliances, or for businesses that rely on repeat customers, such as car dealerships or home improvement stores.
Point-of-sale financing, which allows customers to apply for and receive financing at the time of purchase, can also be a powerful tool for increasing sales. It eliminates the need for them to go through a separate financing application process, making it more likely for them to follow through with the purchase. Additionally, point-of-sale financing can also improve the customer experience by making the purchasing process more convenient and streamlined.
Improved Customer Loyalty
Offering customer financing options can also help build customer loyalty. When they are able to finance their purchases, they may be more likely to return to your business for future purchases. This is because they know that they can afford to make additional purchases and they have a sense of trust and loyalty with the business that provided the financing.
In addition, offering these options can also increase customer retention. For example, a customer who purchases a new car with financing may be more likely to return to the dealership for future car purchases or for service and maintenance. Similarly, a customer who purchases a new appliance with financing may be more likely to return to the store when they need to purchase a new appliance in the future.
How to Implement Customer Financing Options
When it comes to implementing these options, there are a few key steps that should be taken.
Types of Financing Options
There are several types of financing options that businesses can offer to customers. Some of the most common options include:
- In-House Financing: Provided directly by the business. This can be beneficial because it permits them to have more control over the terms and conditions of the financing. However, it may also require a significant investment of time and resources while the business often assumes the credit risk.
- Third-Party Financing: This type of financing is offered by an external lender, such as a bank or a financing company, rather than the business itself. This allows businesses to offer financing options to their customers without having to make a large investment. However, it also means that they may have less control over the terms and conditions of the financing.
- Leasing: This financing option offers customers the ability to use a product or service for a certain period of time instead of buying it outright. This is a great option for businesses that sell high-priced items such as vehicles or equipment, as it can make it more affordable for customers to use the product without purchasing it.
- Point-Of-Sale Financing: Made available to customers at the time of purchase, making it a more practical way for them to access financing. They can apply and receive approval for financing options during their purchase, which increases the likelihood of completing the transaction. These platforms can also help increase approvals because they have the ability to provide access to multiple lenders through one application. They also allow customers to prequalify for offers based on a soft credit pull so they can see options without affecting their credit.
It’s important to note that not all these options may be suitable for all businesses and industries, evaluate which options are the best fit for your business and customers.
Steps for Implementing Customer Financing Options
Regardless of which type of financing option a business chooses to offer, there are several steps that should be taken in order to implement customer financing options.
The first step is to research different financing options. This can include looking into different types of financing, such as in-house financing and third-party financing, and comparing different lenders and their terms and conditions.
Once a business has decided on a financing option, the next step is to set up an account with the lender. This may involve filling out an application, providing financial information, and going through a credit check. Point of sale financing platforms are an option that streamlines the onboarding process.
Finally, it is essential to train staff on how to properly handle these financing options. This includes educating them on the different types of financing available, as well as how to assist customers with the application process and answer any questions they may have. Anyone who is going to be discussing financing with customers should also be familiar with applicable fair lending laws.
Businesses should take the time to thoroughly research their financing options to ensure that they are selecting the best option for them and their customers. Doing so will help them make an informed decision and ensure that their customers have access to a variety of financing options. It is also recommended that companies train their staff on how to handle financing, as this can help to ensure a smooth experience for customers. Many platforms have a training process in place. Doing so can help them build a positive reputation, which is essential for success in today’s competitive market.