Customer Financing
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These days some customers like to pay up front, cash in hand, while others might prefer financing. Increasingly, small businesses are offering customers the ability to finance purchases with great success including higher conversion rates and larger average order sizes. Customers may opt to finance purchases for relatively inexpensive items. Financing isn’t just for big ticket items like boats and jewelry anymore! You may be contemplating financing as an option for your business. This article covers financing options you should keep in mind. 

1. Go it alone

It is possible for your small business to offer and manage customer financing in-house, but it can be cumbersome. 

It is certainly possible to offer a financing program yourself but it can be quite a bit of bookkeeping. You’ll need to assess creditworthiness, track your accounts receivables closely, perform credit checks, and make sure you’re hunting down and collecting payments from customers over time. You may need to hire an extra bookkeeper or spend time calling customers. In some cases, you may find that it is more cost efficient to use a third party financing firm if you want to offer financing solutions to your customers. However, for some types of businesses, like B2B, real estate, and situations with long-term contracts, it may be more feasible to manage financing yourself.

John Doherty, CEO of, a digital marketing internet leads business, affords customers the ability to finance payments over time. He allows customers to pay up front or to pay over 3 months for 30% more. “Interestingly, if they want to pay over time they have no issues with 30% more,” he explained. John doesn’t use a third party vendor and manages the financing in house. “We do not use a third party vendor. I have a great finance person here and we add on the extra when we break the amount up into multiple payments over time.” Some small business owners will opt to charge a monthly fee for customers who want financing instead of a one-time fee like John charges.

Gary Zaremba is the broker and owner of PepZee Realty in Dayton Ohio and has been affording his tenants the ability to use payment plans, a form of financing, if they are struggling to pay their rent. “Essentially I am financing my customers with credit as they pay us back over time.” Gary is able to use his existing property management software to track rent paid and arrears and he uses QuickBooks to create a debt ledger. Gary does sometimes charge late fees but his financing doesn’t have an interest rate – his bottom line is that he is trying to help his renters: “Interest would be nice to charge but we don’t as we want to keep folks in their apartments.”

2. Explore Point of Sale Payment Options

Small business owners may be able to use their existing point of sale (POS) or payment processing vendor to offer financing or payment options. 

Your existing POS or payment processor may offer you the ability to offer affordable monthly payments and charge customers over time. If you already pay for a vendor that manages payments, check what capabilities they offer!

Jack Wong of PNC Learning, an online training platform for insurance professionals, offers customers the option to pay over time instead of all at once. He uses Stripe, which charges customers’ credit cards a predetermined amount each month until the whole program is paid off. Jack also offers payment deferrals. “We do it to support customers who might be struggling a bit financially and in lieu of offering discounts.” Jack does not charge interest to customers who opt for this financing. “We offer this financing purely as a courtesy to students and to help them out during these tough times. The “financial benefit” for us is offering it in lieu of discounts so even though it takes longer to get the money from a cash-flow perspective, we generate higher overall revenues.”

3. Partner with a third-party financing company

There are many third-party financing companies that explicitly offer customer financing options for small businesses. Many of these services are geared toward ecommerce businesses with online stores.

Some vendors help small businesses extend consumer credit as a customer checks out online. Typically, a solution like this will be integrated into your ecommerce checkout flow, and potential customers will learn about and select it as they move from cart to checkout. In most cases, the third party vendor will take care of the application process, checking your customer’s credit score, and collecting payments over time. Your small business will receive an upfront payment of the full amount and assume none of the credit risk. If the customer doesn’t pay, your business will still get paid. These vendors have a variety of ways they structure their fees for small businesses. They also have variable options for customers including buy now pay later and installment plans with monthly payments.

Jason David, CEO of Inspire360, a learning management system, uses a company called Affirm to offer customers payment plans. “Affirm has been great because not only does the customer get to use a payment plan, but we also get paid right away. We’ve additionally seen an increase in our conversion rate by offering it.”

4. Leverage a Third Party Credit Car

Some vendors offering financing to small business customers through a third party credit card 

Your customer may be able to get a credit card that is specifically designed to help them cover the types of services your company offers. For instance, financing firm Care Credit offers financing options to individuals who have out of pocket medical, dental, or veterinary expenses at specific businesses that have an account with Care Credit.  Jack Pilon, co-owner of Peak Image Med Spa, offers his customers financing through Care Credit. Care Credit offers a few options and Peak Image selected the “6 months, interest free financing” option” – it does cost their practice more but Jack “has found that we make up the additional expense through additional revenue.” With Care Credit, the medical provider gets paid up front and the customer pays Care Credit over time. There are credit card options similar to Care Credit for other big ticket purchases. For example, customers who need to make a large car related purchase, like tires or maintenance,  can apply for the Synchrony Car Care Credit Card

How will offering financing impact my cash flow?

One thing to keep in mind when opting to offer financing for your customers is how it will impact your cash flow. If you offer customers the ability to pay over time or to pay later, you will collect revenues at a slower rate, which can impact your ability to make purchases, pay staff, or reinvest in your business. In addition, you may have trouble collecting receivables over time versus collecting them up front. Using a third party vendor option may help alleviate these concerns by ensuring that your business gets paid up front, but you may have to pay for that privilege if you want to offer financing. 

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