Sustainable Customer Financing Options for Small Businesses

Many small businesses saw dismal sales in 2020 as consumers became wary of spending money during the uncertainty of the COVID-19 pandemic. Fortunately, 2021 has seen an incredible rebound in consumer spending. 

Consumer spending is expected to grow around 7.9% with many consumers flush with cash saved up during COVID-19 lockdowns. However, many consumers are reluctant to deplete their savings during these still dubious times.

Small businesses that offer customer financing options allow patrons without full funds to make immediate purchases and pay in smaller installments. This is a great opportunity to attract more customers to your small business you may want to consider.

We’re going to explain how providing customer financing as a small business can convert one-off buyers to long-term customers. In addition, we’ll look at the best customer financing options for your small business.

Benefits of Small Business Customer Financing 

Small business owners can provide customer financing using a third-party or an in-house financing program.

Third-party customer financing companies are convenient but small business owners don’t have control over terms and conditions, can’t provide customer service, and are charged fees.

With an in-house customer financing program, small business owners are responsible for facilitating credit checks, tracking customer installment payments, and sending debts to collection agencies. The small business owner has more control over the terms of the customer financing program and they do not have to pay third-party fees.

Both options are viable; nonetheless, you must evaluate your business and in-house capabilities.

Let’s take a closer look at some of the benefits that come with providing customer financing as a small business. 

Increase in Customers

Businesses that offer financing can attract a wealth of new customers, with 93% of customers that utilize financing saying they would use it again. Providing customer financing as a small business will make you much more competitive.

More Sales

Inevitably, customers may not have the financial resources to pay for a product in full at the time of purchase. A payment plan gives them the flexibility to support your business — paying in installments — despite economic uncertainty.

Added Revenue Stream

An in-house customer financing program gives you the option to charge interest for payment plans. Though you’ll be paid back slower, you’ll increase your cash flow in the long run without changing anything about your core business.

Third-Party Customer Financing Programs for Small Businesses

Offering customer financing is an almost guaranteed method for increasing sales and attracting more customers. The only problem is figuring out which one is the best customer financing option for small businesses.

Each third-party company has a different payment plan system for customers and transaction costs to businesses. Consider the terms of each of the following third-party customer financing companies to see if one suits your needs. Remember, you can also create an in-house program for full control.

PayPal Credit

PayPal Credit is one of the biggest and most trusted names in e-commerce, making it a trustworthy option for small business customer financing. Customers are already familiar with PayPal and can get a line of credit with no annual fee and an interest rate under 20% –– better than most credit cards.

Afterpay

Afterpay is especially popular with online clothing retailers but can be used by any type of business. Purchases made with Afterpay are split into four payments; the first is made at checkout and the other three come in a six-week period afterward. The customer pays no extra costs if they make their payments on time and your business pays about 4% of the transaction value to the company.

ViaBill

ViaBill has a very similar business model to Afterpay, with four installment payments spread over several months. They don’t conduct any credit checks, so all of your customers should be able to use the platform. Like Afterpay, there’s no charge to the customer, and you’ll pay ViaBill about 3% of the transaction cost.

If these options don’t sound like what you are looking for, you may consider securing a loan to start an in-house customer financing program.

Start a Customer Financing Program Using LendThrive

Third-party small business customer financing programs are convenient. However, if you wish to maintain control over the process and provide customer service, an in-house customer financing program is the way to go.

LendThrive allows small businesses the flexibility to start a customer financing program with an extra flow of funds. LendThrive, a part of AVANA’s Family of Companies, provides fixed rate business loans of up to $150K. You can even be approved in as little as 24 hours. 

Contact LendThrive today to apply for a fixed rate business loan that’ll take your business into the future!