What Is Customer Finance, And Should You Offer It?

Two business people in a suit and tie shaking hands. Convertibill Blog

Nowadays, just about everything can be paid for in monthly instalments, rather than upfront. And it’s not just customers who are benefiting from flexible payment plans. Businesses who offer customer finance can benefit  from increased conversion rates and customer loyalty.

So if you want to stay one step ahead of the competition, you could consider offering customer finance. But if you’re not too sure what customer finance is, or whether it’s right for your business, here’s everything you need to know. 

What Is Customer Finance?

Customer finance gives your customers the option to pay for a product or service in affordable monthly instalments, rather than in one lump sum. This makes products more affordable for customers and as a result, makes them more likely to convert and purchase more.. 

Customers who deliberate about whether or not to go through with the purchase are more likely to commit if you offer them a payment plan. They can receive the desired products straight away, without paying the full amount upfront. 

Businesses in a range of different industries are starting to offer customer finance for both small and large purchases — from items of clothing to technology to heavy machinery and even cars. 

Often, customers will be charged interest for choosing to pay in instalments, but 0% customer finance is also becoming more popular. 

How Does Customer Finance Work for Customers?

First thing’s first, visitors to your website, store or offices need to be aware you offer customer finance. If you want to use business finance plans to convert customers successfully, you need to make sure you advertise it as an option. 

Once your customers are aware of the offer, they should be able to quickly and easily apply to pay monthly. Not every customer will be eligible for customer finance — to reduce the risk, each customer who applies will need to be credit checked. A third-party financing company may provide these  credit checks. 

If a customer applies for finance on your website, they’ll redirect to an application page run by this third party. If a customer applies in-store, you can ask them to fill out their details on a tablet. 

Customers may be instantly approved or rejected for finance, so if they’re approved, they can continue making their purchase without any delay. Having such a quick approval process increases the chance of a conversion. If there was a delay, customers might navigate away from your business while waiting for a response. 

Benefits of Customer Financing 

Increased Conversions

Customers are prone to back out of purchases at the last minute — something known as cart or checkout abandonment.  One of the most common reasons for checkout abandonment is the cost and even if the price is right, most people hesitate when it comes to paying for a product. 

But by offering customer finance, and breaking down the overall cost into manageable monthly payments, customers are less likely to worry about the expense and more likely to go ahead with the purchase. Monthly repayments seem much more manageable, and make purchases possible for those without the funds to buy products upfront. 

Encourage Larger Sales

Whether you have more expensive products on offer, or you’re hoping customers will buy multiple products from you, customer finance can encourage larger sales. Studies have shown that offering customer finance can increase Average Order Value (AOV) by 15%.

This is because customers will be more able to purchase if they spread costs over a few months. And with more purchasing power, customers are also more likely to embrace upsells. 

Stay Ahead of the Competition

More and more businesses are starting to offer customer finance. So, if you want to keep up with the pay-monthly trend and stay ahead of your competitors, customer finance is a must. You may even gain new customers from competitors who don’t offer finance. 

Receive 100% of Payments Upfront

While your customers spread the cost of purchases over a certain amount of time, this doesn’t mean you have to wait months for the full payment. To provide customer finance, you’ll need to work with a finance provider, who will pay you the total amount as soon as a customer makes a purchase. 

So your finance provider will take the monthly payments while you receive one lump sum. This way, customer finance won’t cause you any cash flow problems. 

Should You Offer Customer Financing?

There are plenty of benefits that come with customer financing, but is it right for your business? If you sell a lot of products or services with expensive price tags, customer financing can improve conversions. It can even be beneficial for businesses that sell small-ticket items. 

It comes down to whether or not you think your customers would make use of a payment plan option. Most people are open to customer finance, but there are still some who aren’t willing to venture into payment plans. A good way to determine if your customers would make use of customer finance is to ask them. You could run a survey, or send out an email to ask your customers if this is something they’d like to see. 

How to Offer Finance to Your Customers

While it’s possible to offer customer financing using your funds and resources, it’s much less risky to work with a finance provider. Running credit checks, providing finance and chasing payments can take time and effort. Using your money to keep the business running while you wait for incoming payments can also be a big financial strain — especially for smaller businesses. 

But with a finance provider on board, there’s less work and no financial strain for your business. They take care of the contracts and staggered payments, so you can focus on growing your reach and finding new customers to take advantage of your finance scheme.

Using Convertibill® to Offer Customer Finance 

Convertibill® business finance can help you offer your customers more payment solutions. Offer lease and finance solutions to your customers who want to pay monthly without worrying about the short term financial implications. 

You’ll receive the full value of purchases upfront, and your customers will have the option to pay off the total amount over several months or years — you set the repayment period.

If you want to start offering customer finance, get in touch with us today. We’ll talk you through the process and offer expert advice. And if our Sales Finance solution is the best next step for your business, we can get you set up in just a few days.