What Is Customer Financing & How Does It Work?

It’s possible for consumers to use customer finance to set up a payment plan for goods or services. The merchant receives full payment upfront, similar to a credit card.

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The goods are delivered immediately, but the consumer must make split payments over time.

The merchant may have to pay a modest fee for each funded transaction, and the client is usually charged interest on the financing.

The next step after launching a business is to figure out how to attract and retain the interest of your customer base. Of course, in order to do so effectively, you must adapt your business to your customers base’s needs, wants, and budgets.

Offering customer financing, depending on the type, and pricing of your merchandise could be an effective and beneficial strategy for you to enhance sales and customer loyalty.

Customer financing is developed in this way to convert consumers from only considering shopping in your store, whether brick and mortar or on a digital platform, to really make an actual purchase.

Customer financing is offered by both small businesses and larger international brands in order to convert more people into buyers.

If this sounds like something that could help your company, you might be wondering, “How do I offer to finance to my customers?

Fortunately, at Origin finance, we are here to assist you!

We’ll go over your customer financing options, how to pick a financing scheme that fits your business and tastes, and whether or not you should offer customer financing at all.

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How to Make Financing Available to Customers

Customer financing, as previously stated, provides solutions for clients who want to acquire your goods and services but can’t afford to pay the full price upfront.

An example of this is when you sign up for a payment plan, an item which costs £1,000 becomes available to your customer for five £200 instalments (plus a small interest rate).

By providing financing to your customers, you essentially make your items or services cheaper for them.

Offering finance to customers promotes buyer conversion and customer loyalty on the merchant’s end.

Offering consumer financing alternatives, according to one study, improves a customer’s average order amount by 15%.

Furthermore, 93% of clients who utilised credit alternatives in this study stated they would use them again.

As a result, if you believe that customer financing could assist your small business, you will want to learn how to provide finance to your clients.

Overall, there are two basic approaches to providing customer financing. The first alternative is to do your own credit checks, provide loans, and manage payment collection.

This approach, on the other hand, takes a long time and comes with the legal responsibilities associated with using consumer credit information.

As a result, the second option is to rely on a third-party organisation to provide finance to your customers.

Working with a third-party provider relieves your company of the responsibility of issuing credit offers and collecting consumer payments, saving time, and removing some legal obstacles or hazards.

Let’s look at how the process works since the latter is likely to be the best option for most organisations.

Here’s how you offer loans to customers while working with a third-party provider:

  1. The customer first sees a product or service that they want to purchase, either in-store or online.
  2. The buyer will then ask for financing because they cannot afford the entire amount but still want to acquire the thing. You’ll want to make sure you’ve made it clear that you offer client financing so that potential buyers are aware of it. Customers will be able to apply for financing via the online checkout cart, their smartphones, or your POS system, depending on your business. Your financing provider may do a credit check on the customer at this point.
  3. Your consumer will know if they have been authorised or denied for financing in seconds. If the customer is accepted, you will immediately get full payment for the merchandise.
  4. Your customer will get the product or service right away, but they’ll have to pay the finance company in instalments. The payment schedule for the consumer and how much of the purchase they must pay upfront will be determined by the provider with whom you deal.
  5. Unless the finance provider offers a promotional rate, the consumer will be required to pay an interest rate. Furthermore, like with any other credit card processor, you may be required to pay a small percentage each financed transaction.

As you can see, the process of providing consumer finance is actually quite straightforward. When it comes to how to provide financing to your consumers, the most crucial step is to find the finest source for your company.

Also, keep in mind that there are various other types of finance such as:

  1. Lease Finance: The finance agreements have a widespread number of application and at Origin Finance, and can finance assets such as catering equipment, furniture, or IT equipment, fit-out works, software, and AstroTurf, to mention a few.
  2. Refinancing: Equity Release is a financial option that gives the best of both worlds if you need to acquire cash for your firm and have high-value assets such as machinery, equipment, or cars.
  3. Invoice Finance: This involves essentially borrowing money based on what your customers owe your company using invoice finance, allowing you to access funds without having to wait for the payment conditions you specify to pass. Instead of waiting days or weeks for your consumers to pay an invoice, a lender will give you a percentage of the value right away.
  4. Business Loan Finance: This finance is used with the universal purpose of aiding a business, in whatever aspect it requires.

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