Consumer financing allows customers to buy your products when they have limited budgets. With customer financing, the customer acquires your product without paying full time at the purchase. For instance, most consumers do not buy cell phones outright. Many enter into a payment plan from the business to obtain the phone. If you’re worried about when you get paid if you decide to use costumer financing, the answer is that a financing company pays you, while the customer pays the financing company back in installments.
Here’s when to know if it’s appropriate to use costumer financing.
Do You Need Costumer Financing?
The first thing that you should consider when it comes to customer financing is whether it makes sense for your products or services. Are your products inexpensive? Do you offer large ticket items or services? Likewise, you want to think about how much of your target audience can afford your products. If your average buyer might be hesitant to make a purchase, then financing is better for your business.
Will a Costumer Financing Company Approve Your Consumer?
If your customers want to take part in a payment plan, then they have to have approval first. This usually means that your target audience needs decent credit. Check out the various credit requirements of customer financing companies to determine if your audience will qualify for financing plans.
Will Your Products Be Eligible?
Consumer financing companies have to approve the products and services. A financing company may put a minimum cost threshold on items. This means that some products and services may be exempt from the financing plan. As long as you do your research on the financing company and on your product, you should be able to tell if your product will be eligible.
Will Costumer Financing Cost?
If you can’t afford customer financing, then you don’t want to offer it. Some companies offer free services to merchants. However, others will charge a percentage of the sale. Then, others may ask for 40 to 50 dollars a month. Think about the fees and the volume of sales and figure out if it’s worth the costs. Of course, with your consumers, they generally have to pay interest. So, you should make sure that you aren’t putting an undue financial burden on clients.
When it comes to consumer financing, it can be beneficial for merchants and for consumers. It allows another option to pay for products that a client may not be able to pay for any other way. For businesses that can afford it, it has more advantages than disadvantages.