When it comes to growing its business and winning the loyalty of your customers, customer financing can make a huge impact on your business. Customer financing lets your customers pay for their desire product in installments. Suppose you are buying a car and you don’t have the whole money to pay for the car at the time of buying. So you choose to pay for your car in monthly installments. The company will provide you loan to pay for your car and they will charge you a small amount of interest while you pay for your car on monthly basis. Is this helpful for the buyer and seller? Well for the customer it is a very friendly way of payment option as the customer can enjoy with their new product and don’t have to pay the money on the time of purchase. This helps the business to grow and win the loyalty of their customers, increase sales and more customers will show interest in buying from you. In simple it can be really promising for both the customers and the business. Many customers find it easy as they can pay for their product later and in some cases, they don’t even have to pay any extra interest.
But if we talk about providing consumer financing to your customers you first need to know that there are pros and cons for everything. On one side you can increase your sales, can gain more customers, and you give your customer a different way of payment. More payment option means more customer engagement. But there can be some other risk too for the small business owner who is looking forward to providing customer financing. Things that you need to keep in mind before you are starting a consumer financing if you have a small business.
There is always a risk of debt when you providing your customer with consumer financing. Sometimes the loan provider may terminate the loan on behalf of the customers or may cancel the agreements. Even if you are providing a loan from a third party they may charge you some extra money and a small business may end up in debt. You should know that some customers may not be as responsible when it comes to paying the loan. You need to make a proper agreement with your customers before giving them consumer financing. Your customer might back off while paying for the product and you end up in debt.
Is Your Customer Eligible
If you are providing customer financing, make sure to tell everything about it to your customers. if they are eligible to approve the customer financing benefits. How they can choose the method while paying for the product they are buying and what are the credentials needed for it. Small companies should provide all the necessary details because the customer won’t trust you that easily before signing them a loan make sure that they agree on the terms and conditions and meet all the eligibility criteria. Not all products you are selling will have the consumer financing option so let your customers know on which products they can enjoy their financing terms.
Cost of Offering Consumer Financing
You need to know when to provide your customer with consumer financing and when to not. Few products can be costly, and if you are a small business owner, then it could be tough for you to provide your customer with the type of finance. Some parties may charge you some money when you are providing a loan to your customers. Financing companies can charge a small percentage amount from their business owner as their profit. Sometimes you might not even get your total money for the product you sold to your customer because half of the money gets deducted by the financing companies as their profit and they don’t even pay you back.
Few customers don’t even want to accept consumer financing because it may not be valid for them or they might not be interested so providing them with consumer financing is of no point. Consumer financing should help both the customers and the business owner or else it won’t be of any use if you might not see any growth by offering customer financing. There should be a flexible way for the customer to pay for the product they brought but remember the amount you need to get while selling them the product. You don’t want to lose your money and go into debt. For a small business providing consumers, financing could be challenging at first because you may not know how which customer might or might not enjoy your service. It also depends on what kind of business you are running whether it’s a retail shop or an e-commerce store. If you can afford your customers to provide consumer financing, then only you should step forward and can take support from any third party lenders who can help you. But always know that there is a risk in everything when you are just a starter.