How to Offer Financing to Your Customers: A Guide for Small to Medium-Sized Business Owners
As a small or medium-sized business owner, offering financing to your customers can be a game-changer.
It allows your customers to purchase goods or services without paying the full amount upfront,
while you secure the sale and potentially boost your revenue. In this guide, we’ll walk you through
the essentials of consumer financing, why it matters, and how to implement it in your business.
What Is Customer Financing?
Customer financing (or consumer financing) allows businesses to offer their customers the ability to buy now and pay later,
typically through installment plans or third-party financing providers. This option spreads out the cost of a purchase over
time, making higher-ticket items or services more accessible to customers.
Lease-to-own options are another form of customer financing that enable customers to lease items with the option to purchase
them later, offering flexibility for those who may not qualify for traditional credit-based financing.
Why Offer Financing to Your Customers?
1. Increase Sales and Average Order Value (AOV):
Financing removes the upfront cost barrier, making it easier for customers to commit to larger purchases.
Example: A furniture store offering a $3,000 couch with monthly payments of $250 is more likely to convert sales than requiring full payment upfront.
2. Attract More Customers:
Offering flexible payment options appeals to budget-conscious customers and increases your market reach.
3. Stay Competitive:
Many businesses, from retail to healthcare, already offer financing or lease-to-own options. Staying competitive may require you to offer similar solutions.
4. Improve Cash Flow:
Many financing solutions allow you to receive full payment upfront from the financing provider, while the customer repays in installments.
5. Build Customer Loyalty:
Financing options show that you care about affordability, which can enhance customer trust and repeat business.
Steps to Offer Financing to Your Customers
1. Understand Your Customers’ Needs
Assess whether your products or services justify financing or lease-to-own options. These solutions are especially useful
for higher-ticket items like furniture, electronics, or professional services. Survey your customers or analyze sales
data to determine if upfront costs are deterring purchases.
2. Choose the Right Financing Model
- In-House Financing: You manage the financing yourself, directly offering payment plans to customers.
Pros: Full control over terms and interest rates.
Cons: Requires capital, risk management, and administrative resources.
- Third-Party Financing: Partner with a consumer financing provider who handles credit checks, loan management, and repayments.
Examples: Affirm, Afterpay, Synchrony Financial.
Pros: Minimal risk, quick setup, and access to established financing infrastructure.
Cons: May involve fees or lower margins.
- Lease-to-Own Options: Lease-to-own providers like Acima Leasing and Progressive Leasing allow customers to lease items and
eventually own them through regular payments.
Pros: Great for customers with no or low credit scores; flexible repayment terms.
Cons: May involve higher overall costs compared to traditional financing.
3. Find the Right Financing Partner
Research reputable providers that align with your industry and business needs. Some popular options include:
- Acima Leasing: Perfect for customers with no or poor credit who need lease-to-own options.
- Progressive Leasing: Offers no-credit-needed lease-to-own financing for furniture, appliances, and more.
- Affirm: Ideal for e-commerce businesses with higher-ticket items.
- Klarna: Popular for retail and e-commerce BNPL solutions.
Compare their interest rates, customer eligibility requirements, and integration capabilities with your existing systems.
4. Integrate Financing Into Your Business
- In-Store Businesses: Train your staff to explain financing or lease-to-own options and help customers apply. Display clear signage or brochures to highlight financing availability.
- E-Commerce Businesses: Integrate financing or lease-to-own providers into your checkout process. Clearly display monthly payment or lease options on product pages.
- Marketing Efforts: Promote financing and lease-to-own options on your website, social media, and email campaigns. Use phrases like "Lease-to-own available" or "Pay as little as $50/month."
5. Monitor Performance
Track key metrics like financing and lease-to-own adoption rates, conversion rates for financed purchases, and customer repayment performance.
Use this data to refine your financing strategy over time.
Benefits of Financing and Lease-to-Own for Your Customers
1. Affordability: Customers can make purchases without significant financial strain. Lease-to-own options provide a pathway to ownership without upfront costs.
2. Flexibility: Financing and lease-to-own options let customers choose a plan that fits their budget.
3. Convenience: Many providers offer quick and easy application processes with instant approval.
Examples of Businesses Successfully Using Financing and Lease-to-Own Options
1. Furniture Retailers: Many furniture stores partner with Synchrony Financial, Acima Leasing, or Progressive Leasing to offer flexible payment or lease-to-own options.
2. Appliance Stores: Lease-to-own options like Progressive Leasing are common in stores selling appliances and electronics.
3. E-Commerce Stores: Online retailers integrate BNPL providers like Affirm or lease-to-own solutions for high-value items.
Conclusion
Offering financing and lease-to-own options to your customers is an effective way to increase sales, improve customer satisfaction, and grow your business.
By understanding your customers’ needs, choosing the right financing or lease-to-own model, and integrating it into your business strategy,
you can make higher-ticket purchases more accessible and drive long-term loyalty.
Take the first step by exploring reputable financing and lease-to-own providers like Acima Leasing, Progressive Leasing, and others to tailor a solution that fits your business needs.