Financing your customers does not have to be complicated. Check Out These 7 Tips.

If the customer finances a product or service, customers pay in installments or store credit instead of making a significant upfront payment. Businesses can offer to finance themselves or through third-party financiers.

Financing customers at the point of sale can be a powerful strategy to boost sales, improve conversions, and increase customer loyalty. By promoting pay-over-time messaging, businesses can see their average order value increase by 56% and reduce their credit and fraud risk.

Seven steps to offering credit to your customers:

A Retailer’s Perspective on Financing

Third-party finance platforms provide retailers with 100% customer financing upfront — except for a transaction fee comparable to or slightly higher than your typical credit card transaction fee. In addition to protecting retailers from nonpayments and fraud, point-of-sale financing partners integrate seamlessly with POS systems and e-commerce platforms.

Businesses offering in-house financing usually require customers to pay at checkout and manage collections on their accounts receivable. Furthermore, retailers with their funding may be at greater risk and may have lower profit margins. When it comes to offering financing or installment plans, it makes sense for small businesses to partner with a third-party platform.

Customer Experience and Financing

Online retailers offer transparent financing options (especially for online purchases) that take less than a minute and allow flexible payment options. Consumers, therefore, tend to have a positive experience with financing options.

A credit inquiry is perhaps necessary for some customer financing programs. In general, customers who chose to finance their purchase submit their application during the checkout process and are approved almost instantly. Still, most use a soft credit check, no credit check, or no question so that the credit inquiry won’t affect the applicant’s score.

Shoppers typically have the option of selecting multiple repayment plans depending on their financing platform. Alternatively, they can see the current annual percentage rate (APR), loan term, and monthly payment amount. Customer financing companies offering point-of-sale (POS) financing sometimes offer zero interest, free financing. Purchase now, pay later (BNPL) is a common term used to describe this kind of payment.

Ensure your business is ready for customer financing

Finance for customers can be complex, so you need to figure out if it is right for your business. According to retailers, customer financing aims to convert shoppers into potential clients. A promotional offer targets potential customers who might consider doing business with you but are put off by the upfront payment. Your sales will increase if you offer customer financing. Furthermore, your customer loyalty will increase as well.

Offer a Financing Product That Fits Your Needs

Decide what kind of point-of-sale financing program you will offer your customers once you have decided point-of-sale financing will benefit them. Customers can finance their purchases either through a company’s account or through third-party companies, such as Afterpay provide the service. You have to run credit checks, offer loans, and handle payment collection yourself if you do in-house financing. There is also more legal risk associated with dealing with consumer credit information.

When choosing the right financing program for your business, you need to consider several factors such as scalability, cost, risk, implementation, and implementation costs.

Best customer financing options lack a lot of training for employees and are relatively easy to implement. Additionally, your customers should access financing easily and without it significantly affecting their shopping experience. A growing accounts receivable team will be necessary for in-house financing.

Financing Providers to Consider

With PayPal’s standard online checkout, two financing options are available: PayPal Credit and Pay in PayPal Credit provides six months of interest-free customer financing services with payments made in full within six months. In Pay in 4, you can pay in installments over four months without incurring interest. Paypal Credit and Pay in 4 work with popular ecommerce platforms like WooCommerce, Magento, and BigCommerce.

When retailers offer interest-free financing options at checkout, 64% more customers are likely to purchase. Moreover, PayPal has approximately 377 million active users worldwide, so it’s easy for shoppers to use PayPal to checkout. A retailer simply pays PayPal’s standard transaction fee of 2.9% + 30 cents when a customer uses PayPal Credit or Pay in 4.

A multichannel approach to financing

Your sales channels will need to have payment options regardless of whether your company provides financing internally or through an outside partner. The system needs to have a financing program or integration with a third-party platform to store your financing options. The checkout process and product listings of online retailers should include financing options.

In addition, the best point-of-sale financing companies allow easy integration with most POS and ecommerce platforms, so the checkout process is more efficient, and all of your sales information will be at your fingertips.

Educate your customers about financing options

Once your customer’s questions get resolved, you can introduce your new financing options. Let your customers know that you offer financing by prominently displaying it in your store, on your website, and social media. Especially when selling big-ticket items online and converting passive browsers into buyers, this strategy can drive sales. You can also influence shoppers to choose your brand over competitors by making financing a part of your marketing strategy.

Your online store should display standard prices as well as financing prices in product listings. At checkout, you could also give customers the option to pay with financing, akin to PayPal or Apple Pay.