Why Businesses Should Provide Finance Options
15 April 2019 20:54pm
As a customer, you may have found yourself in this situation before: you want to purchase an expensive yet essential item or service, but you cannot afford to pay the entire sum upfront.
You could save money, but let’s say you need this good or service ASAP. If this is the case, then you might take your business elsewhere, searching for more affordable options; however, wouldn’t it be advantageous if you could make a downpayment, and then pay back the rest of the price in installments later? Indeed it would.
So how can you, as a business owner, provide a service like this to your customers? Well to answer that question, you could offer financing solutions. To make this a reality, you typically, form a partnership with an external consumer financing company that provides consumers with a loan. If you go this route, you make the same amount of money for each sale as you normally would, however, customers can pay what they owe over time instead of in one-shot.
How could financing benefit customers and businesses?
Financing options provide several benefits to both consumers and businesses. According to a Forrester Research study, businesses that provided customers with access to credit at the point of sale saw an increase of 32% in sales. It also notes that companies with POS financing options reported an average increase of 75% in order value—which means that customers were less hesitant to make large purchases. Consumers appreciate having financing options because it spares them the burden of having to spend money they do not have, yet, still allows them to buy the good or service that they need.
Businesses that offer POS financing options open their doors to a much broader customer base; it allows people who would otherwise feel that buying is outside of their means given their current situation, to make purchases. It improves cash flow, encourages customers to come back, and makes your business more appealing in the eyes consumers. Companies like eBay and Paypal offer such options to sellers because offering these options could be the difference between making a sale or not.
Why don’t brick and mortar businesses always offer financing options?
Financing sounds fantastic for both parties, doesn’t it? So how come these plans aren’t abundant in brick and mortar establishments? Unfortunately, Kate Harrison from Forbes notes that third-party providers charge high fees for establishing and managing financing programs. Lenders might charge customers interest rates--similar to a credit card--and charge business owners “discount fees” ranging between 10 to 20% of the loan amount. Lenders say these discounts offset the cost of providing customers with lower rates, but Harrison says that in truth they are just another commission for services.
Essentially, brick-and-mortar retailers do not always have the resources to set up POS financing options. Some might not even realize it’s a possibility. There are other worries that business owners might think of if they decide to provide payment solutions without third-party lenders—namely, what happens if a customer neglects an agreement and does not pay everything back? The business might never see that money. Business owners who decide to undergo the process alone will save money, but they will also need to deal with additional accounts receivable(s) or will need to hire another employee to track and follow up with financed payments.
Why offering finance plans is crucial
Fortunately, advances in financial technology make offering financing options more feasible for businesses. One company—Currency—allows businesses to provide their customers with finance options directly through their point of sale system and offers more than the standard cash, credit, and debit card payments. According to the company’s Director of Growth, Josh Reason:
“If a merchant wants to capture business from all possible demographics, then flexible payment options is a critical piece of the puzzle. Customers always want convenience, but on larger transactions, they’ll also want extra security or additional buying power. If you don’t offer what a consumer is asking for within a competitive market, they’ll go elsewhere.”
Customer financing can give you a leg up in your industry—and Currency makes doing so more accessible. Through the CurrencyPay platform, businesses can offer their customers an increased number of checkout methods including credit, debit, eCheck, ACH transfers, and even POS financing, which allows customers to make smaller payments over an extended period of time.
Just think, how many people would own cars if they had to pay for the entire vehicle before they leave the dealership? How many people could live in apartments if they paid rent yearly instead of monthly? This just goes to show how crucial and influential financing is in our everyday lives; these big-ticket expenses would be beyond countless peoples’ reach if they could not space out their payments—so it makes sense (and is only right) to provide consumers with these same payment options when it comes to other products and services.