Why offer financing to customers? How does customer financing for small businesses work? Read on to find out.
Imagine this: A customer walks into your business, completely impressed with your product or service, and excited to make a purchase. They love what you offer but hesitate for a moment, wondering if it fits within their current budget. And this is where offering financing to customers can make all the difference.
It will do three things:
➡️ Give them the final push through the last phase of the sales funnel.
➡️ Possibly encourage them to buy more from you.
➡️ Return to you for the convenience of it all.
And even though these should be enough to encourage you to offer financing to customers, let’s go over them and more reasons in detail.
Why Offer Financing to Customers?
◾Improve Conversion Rate
In line with what we’ve mentioned, offering financing to customers gives them the final push they need to go through with their purchase. This, in turn, improves your conversion rate. Whether in your physical store or on your website, offering financing to your customers can really turn things around for your business.
◾Improve AOV (Average Order Value)
Picture this, a customer is all set to make a purchase, be it a product or a service. And just as they’re getting ready to pay, you bring up how you offer financing to customers. This may encourage them to add on the products or services they’re going to purchase. And this is how offering financing to customers can significantly improve Average Order Value. Because if they make a purchase without upfront financial strain, they more likely will do it. Resultantly, it boosts overall sales for you.
◾Increase CLV (Customer Lifetime Value)
Now, it’s plain and simple - the more convenience you offer customers, the more likely they are to return to your business. And there’s no greater convenience than affordability. So, when you offer financing options to customers, it encourages repeat purchases and long-term relationships, increasing customer lifetime value.
◾Better Customer Retention
With the cutthroat competition in the market, customer loyalty is not a given. They won’t simply keep purchasing from you, and not turn to your competitors out of a force of habit. But by offering them financing aka a better experience and greater convenience, you can keep them coming back.
◾Differentiate Yourself From The Competition
Again, the competition in the market is intense. And everyone is putting their best foot forward to gain an upper hand and lure in more customers. Offering financing to customers is also one way of doing so. It helps you stand out as a business that prioritizes customer convenience and flexibility. And every customer loves that.
◾Inspire Loyalty
It’s not just about gaining customers. It’s also about gaining their trust and loyalty, especially if you want to build strong customer relationships. And when you offer financing to customers, you do just that. You show you care about their purchasing power, and empower them to make purchases they most likely can’t afford upfront, inspiring a sense of loyalty.
◾Enhance Customer Experience
Lastly, enhancing customer experience through financing ensures that customers feel more empowered in their decision-making process, boosting satisfaction and confidence in your brand.
How to Offer Financing to Customers
By now, you must be convinced that offering financing to customers is actually a good idea. And your next question must be “How to offer financing to my customers?” If yes, here are two options: In-house financing, and through a facilitator like Denefits. Let’s see if one of these options can be the ideal answer to your question on how to offer financing to my customers.
Customer Financing for Small Business: Options to Consider
In-House Financing
In-house financing gives you full control over your customer payment plans. This method involves directly offering financing options to customers, enabling them to pay in installments for your products or services.
► How It Works:
▪️ You manage everything: From setting up payment plans to collecting payments.
▪️ Customer fills out an application: Based on your approval process, they can
qualify for installment payments.
▪️ You monitor payments: Track each transaction and follow up on late payments.
► Resources Involved:
▪️ Administrative Effort: You'll need a dedicated team or software to manage
applications, set terms, and process payments.
▪️ Legal Framework: In-house financing may require legal contracts and compliance
with financial regulations.
▪️ Payment Processing: A reliable payment processor is essential to manage customer
transactions and recurring billing.
► Budget Required:
▪️ Initial Costs: Software setup and payment processing fees.
▪️ Ongoing Costs: Administrative costs for managing accounts and processing
payments.
✅Pros:
▪️ Complete Control: You set terms, interest rates, and payment schedules, offering a
customized experience.
▪️ Increased Sales: Financing options can attract more customers by making larger
purchases affordable.
❌Cons:
▪️ Risk of Delayed Payments: You are responsible for tracking and collecting payments,
which could delay cash flow.
▪️ Limited Customer Base: Depending on your approval process, you might only cater
to a specific customer demographic.
Through Denefits: A Smart Payment Solution
When it comes to reducing risk while offering flexible payment plans, Denefits is the ideal option. With Denefits, you can approve 95% of customers instantly, ensuring consistent payments without worrying about missed deadlines. It automates and streamlines the entire financing process while allowing you to offer payment plans to a broader range of customers.
► How It Works:
▪️ Instant Customer Approval: Approve 95% of your customers, regardless of their
credit background.
▪️ Denefits Manages Payments: Automate the payment collection process and enjoy
timely payments, even if a customer misses a deadline.
▪️ Website Integration: Easily embed Denefits’ payment options into your website,
allowing customers to sign up for financing 24/7.
► Resources Involved:
▪️ Denefits Platform: The platform manages all payment collections, approvals, and
customer interactions.
▪️ Minimal Management Effort: Denefits handles tracking, processing, and securing
payments, reducing your administrative workload.
► Budget Required:
▪️ Low Upfront Costs: Denefits is designed to be a low-cost solution for businesses.
▪️ No Collection Fees: No hidden fees or costly collections processes—Denefits takes
care of it all.
✅Pros:
▪️ Reduced Risk: Denefits guarantees you get paid, regardless of whether the customer
delays or misses a payment.
▪️ Increased Customer Base: Approve customers with varying credit backgrounds,
expanding your reach.
▪️ Automation at Its Best: Denefits handles payments, so you can focus on growing
your business.
❌Cons:
▪️ Less Direct Control: While Denefits manages payments for you, you have less control
over payment terms.
▪️ Dependent on External System: You rely on Denefits’ system for payment
collections, which could be less customizable than an in-house model.
Well, now that you know the options you have, the answer to ‘how to offer financing to my customers?’ should be easy to figure out! And from what we’ve heard from our own clients, finance for customers of small businesses has really caused a paradigm shift, so make your decision wisely, and ASAP!
Conclusion
Offering financing to your customers is a strategic move that can significantly boost your business's growth. Whether you choose in-house financing for greater control or a solution like Denefits for streamlined management, the benefits are clear. As more small businesses adopt this approach, it’s essential to act quickly and provide your customers with the convenience and flexibility they seek.
