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Small Business Tips: How to Offer Consumer Financing to Your Customers

Offering consumer financing is one of the most effective tools for increasing revenue. That’s great for the big companies that have the luxury of offering a variety of options, but what about my small business? If you assume consumer financing is only available to big businesses, you will be glad to hear that businesses both large and small have access to financing suitable for (most) current and future customers. Thanks to the variety and availability of lending programs offered by alternative providers like

How Customer Financing Works

Essentially, consumer financing is designed to turn the browser into a buyer. This program allows customers who are deterred by upfront payment the option to enroll in an affordable monthly payment plan, instead of paying for the goods/services all at once. Offering customer financing will help your business make larger and more frequent sales, build brand awareness and increase customer loyalty.

Will my customers appreciate and like the financing option? Obviously, it does your business no good to offer customers a financing solution they do not want to use. To avoid this, consider the two main things your customers value: cost of financing and financing flexibility. Typically, consumer financing provides your customers with three levels of funding: primary, sub-prime and no-credit-check financing. This variety of financing programs ensure customers secure an option that is both cost effective and flexible.

Primary Programs

Considered the consumer’s “first look”, primary consumer financing programs approve customers that have average credit and above. They typically offer “no interest” or “reduced interest promotions” promotions to attract credit worthy buyers. In addition to attractive terms, primary programs have the benefit of decreased merchant fees. This option is best for both the merchant and the customer. However, it can be difficult to be approved, since only individuals with stellar credit are accepted.

Sub-Prime Programs

Sub-prime, or “second look”, programs are designed to approve customers with below average credit. Since these programs involve more risk for the lender, there is usually a higher cost for the merchant. Even so, these programs can account for nearly 80 percent of a business’ respective customer base because most customers will meet the approval criteria of sub-prime financing. Keep in mind that approval for these programs do involve a few extra steps (proof of income, proof of residence, even personal referrals).

No-Credit-Check Programs

Tertiary or “third look” programs approve an extremely high number of applicants – even 100 percent, depending on the lender. These programs are extremely customizable and are dependent on the client’s cash-flow needs, margins and risk tolerance. With EMB, merchants can secure no-credit-check financing programs to offer their customers; this special type of lending program involves a no credit check requirement. For some primary and second-look consumers, these programs are a way to reduce inquiries on their credit report or to establish/rebuild credit. No-credit-check programs, on the other hand, provide consumers with bad credit or no credit with an option as well.

If you are worried that today’s economic climate might affect your customers ability and willingness to make large purchases, consider how consumer financing can help. In using these programs, small businesses immediately see their sales increase. Whether you are a small brick and mortar shop or a multi-million-dollar e-commerce store, consumer financing programs are a great way to match the individual needs of your customers.