4 Ways to Know Consumer Financing is Good for Your Business

Sep 18, 2018

Knowing when to add a consumer financing program to your business can be just as daunting as implementing one. Businesses must know whether they are suitable for consumer financing programs before moving full-speed ahead. Get to know the nuances of customer financing, and then use the four factors listed here to determine whether it’s a good fit for your business.

Understanding Customer Financing

Consumer financing programs allow customers to get goods or services from a business upfront without paying the full price at the time of purchase. Basically, this is when something, often an expensive item, like furniture or electronic, is bought on a payment plan. So, the customer agrees to pay a minimum amount every month for a certain period of time until it is paid in full. Interest and other fees also are part of the payments.

Though the customer is paying the entire amount upfront, the merchant does get its money at the time of the sale. The third-party consumer financing company pays the merchant for the item, and then the customer pays the financing company back.

Merchants find consumer financing appealing because it helps them boost sales, and customers like it because they can get what they want even if they have limited funds.

Is Consumer Financing Right for Your Business?

Unfortunately, every business doesn’t have the ideal model to successfully offer consumer financing. Look at these four factors to determine whether financing is right for your business.

1.    Business Size Matters

Financing programs make the most sense for bigger businesses that have customer service areas or in-house, on-site finance managers. Having this support makes businesses better prepared for the communication and complex issues to arise with an in-store financing option.

2.    Understand Your Gross Profit Margins

Merchants with high-gross profit margins are best suited to offer consumer financing. Those that gross lower profits will have challenges keeping up with the cost because those credit programs are geared to sub-prime customers.

3.    Are You a More Traditional Merchant?

When it comes to financing, the products and services you offer matter. If most of your offerings average about $20, then, financing doesn’t make sense for your business. However, if many of your items cost several hundred dollars are more, such as smart televisions, laptops, or phones, then consumer financing is a viable option.

Also, for instance, home décor and furnishings, are ideal products for financing because they are often expensive and oftentimes people buy more than one piece at time. However, if your business sells refurbished or gently used items, then you will have a hard time finding a lender for a financing program because they find these goods to risky.

4.    What Are Your Competitors Doing?

If your competitors are doing it, it’s definitely time to consider offering consumers installment plans. If you don’t, you will be placing your business behind the eight ball. You don’t need to provide the same offerings as your top competitor, but you have to get in on financing if you want to stay in the game.

The Final Thought

Offering installment plans are ways to bring more sales to your businesses and gain a loyal customer base. Consumers will love to be able to acquire products without breaking their limited budgets. Knowing whether a consumer financing program will benefit your business will take some careful consideration. When you think you may be ready, consider a lender, like eMerchantBroker.com (EMB). It works to find solutions for businesses of all sizes and backgrounds.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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