When financial flexibility can make or break a sale, customer financing emerges as a game-changer for small to medium businesses (SMBs). These solutions not only ease the purchasing process for customers, making purchases more affordable, but they also serve as a catalyst for SMB growth.
By offering customer financing options, SMBs can broaden their market reach, encourage customers to commit to higher-value purchases, and increase revenue. For SMBs looking to leverage customer financing to fuel growth, continue reading for effective strategies for implementing these solutions and unlocking their potential.
Benefits of Customer Financing for SMBs
Incorporating customer financing options can help SMBs stand out in a competitive market because offering financial flexibility can be a powerful tool to boost sales and customer loyalty.
Here are the key benefits of customer financing for SMBs:
- Increased Sales Conversions: Businesses offering BNPL led to a 2% uptick in their conversions, underscoring its effectiveness in attracting customers. Businesses without BNPL options experienced an 11% drop in conversions.
- Higher Average Order Values (AOV): Customer financing increases AOV by making costly items more accessible. As payments are spread over time, customers are encouraged to spend more.
- Enhanced Customer Loyalty and Retention: Flexible payment options foster customer trust and loyalty, addressing immediate financial needs while promoting repeat business.
- Access to a Broader Customer Base: Point-of-sale customer financing attracts a diverse customer demographic, especially those reluctant to make upfront large purchases, expanding SMBs’ market reach.
- Keeping Pace with Market Trends: BNPL’s popularity is on the rise, with spending spiking during holidays. For instance, BNPL usage surged by 72% during Cyber Monday 2022, highlighting a trend SMBs can capitalize on to boost revenue.
- Improved Cash Flow: Financing options often provide SMBs with upfront payment for purchases, ensuring immediate cash flow while offering payment flexibility to customers.
Types of Customer Financing Options
By offering tailored financing solutions, SMBs can meet the financial needs of different consumer segments, making purchases more accessible and boosting overall sales performance.
Here’s a closer look at the types of customer financing options:
- Buy Now, Pay Later (BNPL): Allows customers to make purchases immediately and pay over time, typically without interest. This option is perfect for consumers looking for flexibility without immediate financial burden, making it a great fit for the retail and e-commerce industries.
- Lease-to-Own Options: Provides a lease agreement with an option to purchase at the end. This is attractive to customers who prefer not to commit immediately. Electronics and appliance stores benefit from this model, allowing customers to take home high-value items with the option to buy.
- Installment Loans: Offers a fixed amount of money that is repaid over time, usually with interest. Consumers planning larger, more significant purchases in the home improvement sector find this option appealing.
- Deferred APR Plans: Features a period during which customers can pay off their purchase without interest. Suitable for individuals in the healthcare sector, making it easier for patients to manage out-of-pocket expenses.
Factors to Consider When Implementing Customer Financing
To facilitate customer financing, SMBs frequently turn to software-as-a-service (SaaS) providers for ready-to-implement solutions that can be easily integrated into current business processes.
These platforms enable businesses to offer various financing options with minimal hassle. Before implementing customer financing, consider the following:
- Choose the Right SaaS Provider: Partner with a provider that specializes in your industry and offers financing software that integrates seamlessly with your existing systems, including mobile applications. This ensures a cohesive experience across all platforms, maintaining operational efficiency and user engagement.
- Offer Diverse Financing Options: Opt for a SaaS provider that presents a variety of financing solutions, terms, amounts, and promotional offers. Having a range of options makes your financing more accessible to a broader audience and can meet the unique needs of different customers.
- Work with a Reputable Lender Network: Choose a provider whose lender network is large, reputable, and able to cater to a wide array of credit profiles. This diversity ensures that more of your customers can utilize financing, enhancing customer satisfaction and increasing sales opportunities.
- Provide Transparent Financing Terms: Provide clear and understandable financing terms alongside online loan comparison calculators. This empowers customers to make informed decisions and enhances their financing experience.
- Ensure Seamless Integration: Ensure the financing solution integrates effortlessly with your company’s existing workflows, including online and in-store payment processes. Your customers should be able to apply for financing without needing to leave your site or store.
- Display Quick Pre-Qualifications: Work with a SaaS provider that offers fast pre-qualification that is easily accessible on your business’s website or within the in-store. Fast and efficient pre-qualification improves customer satisfaction and supports higher conversion rates by reducing potential purchasing barriers.
Challenges of Customer Financing for SMBs and How to Overcome Them
While customer financing can significantly enhance sales and customer loyalty for SMBs, implementing such a program comes with its own set of challenges. Partnering with a SaaS provider to offer financing can streamline the process, but there are still hurdles to navigate.
Below, we outline common challenges SMBs may face and provide advice on overcoming them:
- Complex Integration Processes: Integrating financing software into existing business systems can introduce technical snags, leading to operational disruptions or data handling issues. Choose a SaaS provider known for easy integration and plug-and-play software. Rolling out the financing option gradually can help manage the transition without overwhelming your team or operations.
- High Implementation Costs: Setting up a financing option, including upfront and ongoing expenses, comes with costs that might strain your budget. Negotiate with your SaaS provider for a payment plan that fits your budget and business size. Some offer flexible pricing that can adjust as your business grows.
- Customer Awareness and Adoption: Ensuring that customers are aware of and willing to use new financing options can be a marketing challenge. Roll out an omnichannel marketing strategy to spread the word about your financing options. Make sure your team knows how to market financing options to customers to increase adoption rates.
- Customer Service and Support Challenges: With financing, inquiries about the process and issues related to billing and payments arise. Establish a clear customer service protocol for financing inquiries, ensuring your staff is thoroughly trained. Develop an FAQ section on your website specifically for financing questions to preemptively address common concerns.
Final Thoughts
Customer financing is a powerful tool for SMBs to increase sales, attract a wider customer base, and build loyalty. Choosing the right SaaS partner and addressing implementation challenges are key to unlocking these benefits. This strategic move positions SMBs for success in today’s competitive and evolving market.
