Many small businesses operate on a cash only basis, meaning that they don’t allow consumer financing. If you are one of these businesses, then you could be holding your company back. Financing can be a great way to give your business a boost and help it to grow. In fact, there are a few specific reasons why you should seriously consider offering financing to your customers.
When you offer customers the chance to buy things on credit, it encourages them to make a purchase when they otherwise would not. For example, if someone does not have the money to buy a new couch but they find a company that will sell them a couch with financing, then the chances are good they will go ahead and make the purchase. As you can see, offering financing can help customers to feel better about buying items that they might not have bought if they had to pay cash up front.
Draws in New Customers
Another way consumer financing can help our business is by drawing in new customers. There is even a potential for drawing customers away from your competitors. When people see that you offer a financing option, they may decide to shop at your business because it gives them the option to put their purchases on credit, freeing up their cash for more immediate needs. One of the biggest challenges of business is getting new customers, so this will help you overcome that hurdle without having to spend extra money on marketing efforts or other things you would have done to try to draw customers in.
With encouraging purchases and drawing in new customers, it isn’t hard to see how offering your customers financing options can increase your profits. However, they also help increase profits in two other ways. First, they encourage people to buy more. Having the option to just put a purchase on credit often makes them a little freer with their spending, so they may spend more than they would have if they were paying cash. Second, you get to add additional charges for the financing, like interest or other fees, which can enable you to earn even more on every purchase they make. However, fees and interest can be waived to encourage more purchases, which in the end could bring in more money than these charges, so use them carefully.
Consumer financing can be a great tool to use to grow your small business. If you haven’t started offering financing, you should at least consider what it can offer your company.