When you think of offering consumer financing most people think of super corporations and high-end luxury appliances. Something that only large business with bargaining power with the banks can do. You might be thinking that with my cash flow, how would I ever be able to loan customer money! What if I told you that your small business could offer the same financing at the same cost, without jamming up your cash flow? I know you can barely contain your excitement, so let me quickly explain.
First, why even bother with consumer financing? According to PayPal, very similarly to gift cards, consumers will spend 15% more when consumer financing is an option. Think about the last time you financed something, you could of done the responsible thing and saved enough cash, but hey we’re Americans! We want it now! So you’ll just take the interest as a convenience fee! In addition, 90% of users of consumer financing say they plan to use it again. So how about that for building customer loyalty and ticket uplift?
Second, how much trouble is this going to cause me? Well the answer is none! That is if you hire an outside financing firm (like Blue Dog). They usually will take about 1-5% or a monthly fee but they take total liability of the purchase. The firm will pay you the total cost of the purchase. Therefore, collections are now their problem, leaving you with the cash and ready to grow. Now sit back and relax and enjoy your extra sales.
At this point you may be thinking “I have enough cash, I can offer my own financing! Screw these guys trying to get 5% for nothing!” Well that may sound easy but it’s not. Not only are you tying up cash flow, you also now get the joy of harassing customers over late payments. Channel your inner Dog the Bounty Hunter, and repo that sofa.
Should I be offering Consumer Financing?
Simply put, yes. Overall, consumer financing is an easy solution to a common problem among consumers. Leverage consumer financing to build brand loyalty and drive more business.