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How To Offer Customer Financing: Detailed Guide For Business Owners & Vendors

October 4, 2023
Multipli Team

As a business owner, embracing innovative change within your business is critical. In fact, innovation can make or break a business, especially anything to do with your sales and marketing process, so evolving your proposition on this front should be paramount.

One such strategy that has gained significant traction in recent years is customer financing. As a savvy business owner, understanding the nuances of customer financing can not only help you enhance customer relationships but also foster sustainable growth for your business.

In this comprehensive guide, we will delve deep into the world of customer financing, exploring its benefits, implementation strategies, and best practices.

What is customer financing?

Customer financing, also known as consumer financing, refers to a business practice where the seller (you) provides financial assistance to customers for purchasing products or services. This arrangement allows customers to make purchases with convenient payment plans, thereby increasing sales opportunities for businesses.

What are the primary options for offering customer finance and consumer finance?

There are two main options when it comes to offering customer finance:

  1. The finance is offered by you, and in turn you own the risk
  2. The finance is offered by a third-party, who in turn carries the risk on your behalf

Utilising a third-party for finance is often preferable for business owners. Why? Because it allows you, the business owner, to focus on growing your business and company, instead of trying to manage business risk and financing processes.

What are the benefits of offering customer financing to your customers?

There are numerous benefits to offering customer financing to your prospective customers and would-be sales pipeline. A few of these benefits include:

Customer financing can boost sales

Structured and tailored payment plans for your customers can make it easier to buy from you, removing the potential “sticker shock” moment when pricing is initially discussed.

Customer financing can enhance loyalty and repeat purchases

Giving your customer the flexibility to repay on easy to manage terms, can assist with driving a sense of loyalty to you and your business. It can also facilitate repeat purchases, as your customer essentially has a line of finance that can be tapped again and again.

Customer financing offers a reason to choose your business over your competitors

It’s not always about the best price; it’s about the customer experience and removing impediments to progress with a product or service. Offering customer financing can help reduce friction and streamline the selection of your business over that of a competitor.

Customer financing can boost the average transaction value

If repayment terms and business payment plans are setup to benefit your customer, it can help boost the average transaction value as it opens up the potential to buy additional products, services or support frameworks from your business in the upfront transaction.

How to setup, implement and offer customer financing for your business

If you’re a business owner, finance director or sales director looking to offer customer finance to smooth cash flow, open up incremental sales and overall drive net-new sales for your business – here are some considerations:

Research financing partners

Collaborate with third-party customer financing providers that specialise in consumer lending, with specific experience in your vertical or industry. Big banks often don’t understand the value of your business, so opting for a non-bank lender who appreciates the product and service you offer is key. Ensure you selected finance vendor aligns with your business values and offers terms that are competitive and useful to your consumers.

Be transparent in your communication

When discussing finance options for customers, be super clear and transparent. Finance is difficult for many people to understand, so ensure you take the time to clearly articulate the terms, rates, and bespoke payment options you wish to offer. Partnering with a customer financing specialist can assist with this.

Make the application process easy

Upon offering customer finance, ideally through a third-party finance provider, ensure that you, your customer, and your selected finance partner make the onboarding and application process easy.

Adhere to compliance and regulatory requirements

Stay updated with financial regulations and compliance requirements in your region. Adhering to legal standards protects both your business and your customers and is another great reason to choose to offer customer finance through a finance partner, as opposed to trying to maintain your own offering.

What are the best practices for offering attractive customer financing?

Consider the following when offering customer financing that is attractive to your customers:

Diverse business payment plans

Work with a third-party customer financing provider that can tailor the business payment plans to your customers needs. There is no such thing as a one size fits all approach to customer financing. Options could include small down payments, extended business repayment plans and repayment cadences that adhere to your customers cash flow.

Exceptional customer service offering

Customer service is crucial in all aspects of offering customer financing. Train your staff well, help your own business understand how your customer financing works, be fast to respond to queries and guide customers through the sales process.

Actively promote your customer finance solution

Promote your financing options through targeted marketing campaigns. Highlight the benefits and encourage customers to take advantage of these offers. Display this as a unique value proposition on your website to ease the sales process.

Ready to offer customer financing in your business, to your customers?

Incorporating customer financing into your business strategy can be a game-changer, opening doors to increased sales, customer loyalty, and a robust market presence. By understanding the benefits, implementing best practices, and maintaining transparency, you can navigate the world of customer financing successfully.

Remember, the key lies in providing value to your customers. By offering flexible and accessible financing options, you not only meet their needs but also establish your business as a trusted partner in their financial journey. Embrace customer financing today, and watch your business soar to new heights of success.

If you wish to speak to us about how we can set you up with customer finance solutions for your business, please feel free to contact us today.