For companies whose products have a high sticker value, being able to offer customers multiple payment options is essential. Accepting credit cards, cash and checks are fairly standard, but there are also other financing choices that could help give your business a competitive edge. One of these is retail financing.
What is Retail Financing?
Sometimes called customer financing or consumer financing, retail financing provides customers with a short-term installment loan for purchases above a certain level. Here’s how it works: your business partners with a retail financing company. When your customers make a purchase they can apply for retail financing. Approval is granted or denied in just minutes. The customer signs the paperwork and the transaction is completed. The retail finance company gives you the money and then collects the loan every month from the customer for the next 6 to 24 months.
Benefits of Retail Financing
1. Decreased Risk
The benefits of offering retail financing to your customers include the decreased risk to your business of default. The retail financing company assumes liability for the repayment. They will go after customers for the money owed; you no longer have to.
2. Increase Sales
This type of financing program could also help you increase your sales compared to competitors as it might attract some people that wouldn’t otherwise be able to buy your products. And with some companies, you may even be able to make a little extra money on those retail financing loans as they increase the interest rate to give you a cut.
3. Increase New Customers
Another benefit is that your customers do not have to have perfect credit to qualify. Businesses that provide financing expand their potential customer base by making their goods and services more accessible to a wider range of customers. Not everyone has the money available to pay for a significant purchase up front.
There are reasons to be cautious about retail financing though. There can be high fees associated with signing on to the program as well as set-up costs in some cases. You will have to determine whether this program would increase your business enough to make the out-of-pocket costs worth it. Part of that means determining if your clientele would truly be interested in retail financing.
If your working capital could use a boost, retail financing may be the solution to your business funding needs.