Increase Sales With Customer Financing Solutions

Maximizing sales is always a top priority for business owners. Many businesses find that offering financing to customers reduces barriers to sales. Continue reading to learn how to offer financing to your customers and what to keep in mind when doing so.

 

What Is Customer Financing?

Maximizing sales is always a top priority for business owners. Many businesses find that offering financing to customers reduces barriers to sales. Continue reading to learn how to offer financing to your customers and what to keep in mind when doing so.

 

This is popular among buyers of any big-ticket items, including construction equipment, agricultural equipment, trucks, trailers, and even aircraft.

 

Customer Financing Options

As a business owner, you can offer financing to your customers in one of two ways: on behalf of your business (this is referred to as “in-house financing”) or through a separate financial institution (this is called “third-party financing”).

 

In-House Financing

Businesses that offer in-house financing work with customers directly to help their customers make payments in installments over time and pay an agreed-upon interest rate. To accomplish this, businesses typically create a dedicated financing department and use software or automated solutions to manage funding and payment processes.

 

When you offer in-house financing, you can set the terms, credit limits, interest rates, and loan approval criteria. This type of service can increase customer loyalty but also requires careful risk management. For example, a customer’s failure to pay a loan in a timely manner can consume additional company resources.

 

Third-Party Financing

Offering third-party financing means partnering with a company to handle tasks like customer vetting, loan approval, and payment collections. Working with a third-party finance company can benefit both you and your customers. It clears a path for customers to make big purchases without equally big upfront expenditures, and it doesn’t require companies to add infrastructure or take on additional risk.

 

While third-party financing streamlines the overall financing process, businesses must research compatible services and consider factors such as fees, flexibility, and ease of integration with existing systems. It’s also wise to look for a third party with a customer-friendly loan application process and close ties to trusted financial institutions.

 

The information above provides a brief overview of in-house financing and third-party financing options. To learn more about each type of customer financing, read our detailed post on this topic.

 

 

How To Offer Customer Financing

Whether you choose to offer in-house financing or work with a partner solution, the customer experience should be relatively straightforward:

 

1. The customer chooses to finance a purchase when checking out, whether that is in person at a brick-and-mortar location or on an e-commerce website.
2. The customer completes a questionnaire so the financing provider can assess their credit and the level of risk the business might assume.
3. If approved, the business will receive funds:
   • In smaller payments over time from the customer (when financing in-house)
   • Or in full within seven days (when working with a third party).
4. The customer will receive the goods or services they purchased immediately and will be responsible for paying off the item in installments over a set period of time, with the total including interest based on the financing agreement and the total amount financed.

 

 

What Are Potential Risks For Customer Financing?

Customers often prefer financing to increase their purchasing power for expensive items, leading to more sales for your business. According to an Equipment Leasing and Finance Association forecast, more than half (54%) of equipment purchases will be financed throughout 2024.

 

Whether you sell heavy machinery, farm equipment, commercial vehicles, trailers, RVs, motorsports, landscaping equipment, turf and lawn equipment, or aircraft, it’s important to weigh the pros and cons of offering financing on your own or through a service.

 

In-House Financing Considerations

When providing financing in-house, you will take on risk each time a customer is approved for financing. Although you should only approve customers with a track record and credit history that prove they are likely to pay you back without difficulty, there is always the risk that the customer may default on payments.

 

Third-Party Financing Considerations

When offering customer financing through a third-party service, calculate the cost of doing business with your chosen service. Some third-party financing services charge a monthly rate. Others take a percentage of the total price or each installment the customer pays. Knowing these costs is vital when deciding whether it’s beneficial for your business to offer customer financing.

 

Fast & Easy Third-Party Financing With Currency

You can offer financing on your own or work with a service. If you’re looking for a dedicated person to discuss third-party customer financing options, reach out to Currency.

 

Currency offers streamlined financing solutions in heavy machinery, farm equipment, commercial transportation, and other industries in the U.S. and Canada. To learn more about financing with Currency, contact our sales team at 844-724-7376 or complete a quick “Let’s Talk” form.

 

Find a customer financing solution that fits your needs and start winning in business now!

 

This post was originally published on February 25, 2021.
This post was updated on September 27, 2024.