Offering Customer Financing Could Convert More Buyers

Jan 06, 2022

In order to launch and grow a successful business, you must be able to not only acquire but also maintain a customer base. For this to happen, your business must address the wants, needs, and budgets of your customers. Customer financing offers a great opportunity to not only increase your sales, but also earn customer loyalty.

What Is Customer Financing?

Customer financing allows customers to enroll into a payment plan in order to purchase any goods and services. It works like a credit card in that, instead of paying the full amount up front, customers have the opportunity to pay the total amount of their purchase with interest and/ or fees included over a specified period of time.

How Does It Work?

In order to take advantage of the customer financing option, the customer will need to apply for this financing during checkout. Once approved, your customer will be allowed to make monthly payments to the financing company. The merchant will receive the total cost of the purchase at the moment of the transaction.

Are There Any Costs Involved?

In order to secure customer financing, customers typically pay an interest fee and/or management fee. The percentage varies greatly as it depends on the finance company, its terms, the “creditworthiness” of the customer making the purchase, and a series of other factors. 

There are also costs related to a business having access to this type of financing as well. Two models currently exist:

  • You, as the merchant, manage the entire process from beginning to end.
  • Or you can outsource all credit checks and payment collection services to a third party that is able to manage this process on your behalf.

If you take on the entire process by yourself, you would have to pay for all costs related to conducting credit checks and collecting payments. If you decide to proceed with a third-party, you will only have to pay a small fee directly to the financing company for every transaction, or a flat monthly fee to access the service. 

What Are The Benefits Of Customer Financing?

There are many benefits for merchants if they decide to adopt customer financing in their business model. Here are just a few:

  • A Boost In Sales:

Not having enough payment options is a sure-fire way to lose customers. By offering customer financing, you are giving them more opportunities for checking out on their own terms. Less abandoned carts mean more sales.

  • Acquire Customers On The Spot

Studies have shown that the first purchase a customer makes is the most important one to accomplish. In fact, it was discovered that only between 5 to 20 percent of new customers are likely to make a purchase. 

Once you acquire a customer, there is a 60 to 70 percent chance the customer will return to make another purchase. By offering customer finance, you are increasing the possibility that the customer will complete their purchase. 

  • Payments Are Upfront

You don’t have to worry about waiting to receive your money. The finance company pays you immediately. They simply take charge to handle the payment collection from your customer.

  • Prices Are Better For The Customer

One of the barriers to completing the checkout process is the pricing of the product. When you offer to split a larger payment into several smaller ones, you simplify the decision-making process for the customer. Making the purchase more attainable and less of a financial burden. 

Is Customer Financing A Fit For Your Business?

This option will be worth considering if you believe that your customers would be willing to take advantage of it. You could gauge interest by emailing a customer survey. If it seems like they would be interested, then this would be a good strategy to implement. 

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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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