If you are looking for a way to increase your sales by allowing your clients to pay for their purchases over time, you may be considering consumer financing. You may look into installment plans; buy now, pay later, and flexible financing programs to build your reputation and customer base while expanding your profits. These are a few things you should know about this type of financing.
How it Works
This type of financing is often found at brick-and-mortar stores. These stores typically allow customers to pay for large purchases in installments, and they may offer an initial period of interest-free payments on large purchases. This interest-free period encourages your customers to purchase more than they would have if they had to pay in cash immediately.
As online shopping expands, many of these stores have also begun to offer customer financing plans. For example, you may purchase furniture online today and pay for it over time. The process is simple. Once the clients find what they want, they can apply for an account. It takes seconds to determine their approval, account limit and interest rate.
Choosing a Provider
Your company will not typically provide the financing. You will probably work with a third-party provider. Therefore, you need to do extensive research when choosing your provider. For example, look for a lender that works with businesses of your size; an organization familiar with your industry would be a benefit as well. Make sure the provider takes no more than 5% of credit sales. Review their contract terms, and avoid long-term contracts or those that renew automatically. Also, avoid financiers with minimum monthly sales requirements. Finally, search for companies with exceptional customer service and an easy application process.
Your Advantages
You may experience several advantages by offering consumer financing to your clients. First, you are paid quickly. Rather than waiting for each payment, you actually get paid for the entire purchase, less the financier’s fee, immediately. This allows you to promote your products at a lower monthly price. For example, you aren’t purchasing a $1,200 smartphone, you are only paying $20 per month.
Because your clients can pay over time, they are more apt to make larger purchases. They may feel more confident that they can afford a better model or more accessories if they can spread out the payments. In addition, your customers will be more loyal to your company because they feel as if you are working with them to get what they need. Then, these happy customers share their positive reviews with their friends, neighbors and peers, expanding your customer base.
Your customers will appreciate their ability to purchase what they want now and pay for it over time. However, you need to do some research to find the best deal for you and your customers.