Many of this country’s largest retailers have been offering consumer financing as part of their sales initiatives for years, but this is a strategy which hasn’t really gained traction yet with small businesses. The reason for this is that smaller companies often lack the means to establish such programs, they don’t have the funds to finance it, and are unwilling to take on additional risk. Still, this is an area with great potential for exploitation by small businesses, as some of the reasons below should make clear.
Benefits of consumer financing
Numerous studies have been conducted on the topic of consumer financing, and the results consistently bear out its appeal to buyers. More than 93% of consumers who have been offered consumer credit financing indicate they would use the program again to make purchases. In addition, the average order value (AOV) increases by at least 15% when financing is made available. In the case of major purchases, having a financing option is often the difference between making a purchase or opting out of it. In roughly 1/3 of all cases surveyed, shoppers reported that they would have made no purchase at all if the option to finance had not been available.
Consumer financing in action
Most businessmen are familiar with the online version of consumer financing, which calls for a potential buyer to answer a few questions, after which he/she would receive a decision on approval. Assuming a purchase is approved, the prospective sale is made and the transaction then goes through. The seller generally receives the entire amount of the sale within several days, with the financing relationship remaining between the customer and the lender.
Some of the new consumer financing products now becoming available allow retailers to make use of the consumer financing option right at the checkout counter. Instead of having a customer rummage around for their credit card, he/she can simply indicate a desire to make use of consumer credit (made available by an alternative lender), and the sale proceeds from there in the conventional way. In most cases though, sales financed in this manner will have a significantly greater total value than if financing were not available.
For more help getting acclimated to consumer financing, contact Bull Market Capital: Business Funding Solutions at 336-579-0110.