What Is Consumer Financing and How Can It Help Your Business?
Many businesses deal primarily with consumers, everyday people looking for goods and services that make life easier. Consumers range from college students to newlyweds, from working parents to senior citizens. Consumer financing is designed to help these people pay for products comfortably.
What Is Consumer Financing?
This type of financing involves businesses offering alternative payment options to customers. Instead of having to purchase an item immediately, the client can defer payments or spread the purchase out over many months. Sometimes, this program also includes incentives such as zero interest for a certain number of months or a few installments free.
There are several payment options under this umbrella, including branded credit cards and loans with monthly installments. The financing is usually provided by a third-party lender with an easy signup process, though sometimes businesses provide the credit themselves.
How Can Offering Consumer Financing Be Good for Your Business?
At first glance, it may seem like providing financing would result in lower monthly revenue for businesses, but that’s not generally the case. Usually, third-party financing companies deposit the full amount of the sale, or a large portion of it, immediately. There are also several advantages for companies using this program.
For one thing, it can increase the total sales made. Customers who were on the fence about buying something may feel freer to do so because of easy payment options. For people who simply can’t afford a lump sum purchase, consumer financing enables them to buy things that would otherwise be out of reach. That makes the customer happy, and it represents additional revenue for the business.
In addition, financing options may boost the amount each client spends. Instead of having to choose a lower-priced option to stay within a budget, clients have the freedom to choose more expensive models with better features and still have the ability to pay comfortably.
Why Do Customers Like Consumer Financing?
Financing customers is a smart way to build client loyalty and increase satisfaction as well. Put simply, modern consumers want to have several payment options. That way, they have more control over their finances.
Companies that provide a variety of customer financing options may get more business because of this. Many clients prefer to buy from companies that provide financing options. Instead of shopping at many different places, they may decide to make most purchases at the same store to take advantage of simple financing payments.