Customer financing is a growing trend among businesses, particularly in home improvement, retail, and even healthcare industries. It allows customers to obtain financing for their purchases, making it easier for them to afford your products or services. But before you offer financing to customers, it’s essential to understand the pros and cons and the different options available.
In this blog post, we’ll cover everything you need to know before you offer financing to customers, so you can make an informed decision and grow your business.
Benefits of Offering Financing
To start, let’s explore several of the top benefits your home improvement organization may experience when you offer financing to customers.
- Reach a Wider Variety of Customers: When you offer financing to customers, it allows you to cater to clients with varying financial situations, making your products and services more accessible to a broader audience and helping you expand your potential market share.
- Minimize Lost Sales: Financing can help prevent lost sales by giving customers who may not have the cash on hand the ability to make a purchase through manageable monthly payments.
- Win Bigger Projects: Financing allows customers to tackle more extensive and ambitious projects without needing significant cash capital upfront, which can translate into more revenue for your home improvement business.
- Maximize Your Bottom Line: Winning bigger projects increases your average transaction value, potentially boosting your organization’s overall profits.
- Get Paid Faster: When customers use financing options, you generally receive payment from the financing provider sooner than if the customer paid in cash or with a credit card. As a bonus, the organization won’t have to manage collections for non-payment.
- Grow Your Business: Offering financing can help you gain a competitive edge in your industry and attract more customers, increasing your market share and leading to business growth.
Cons of Financing
- Fees: Offering financing may involve fees, such as transaction fees, dealer fees, or service charges. It’s crucial to understand these costs and factor them into your pricing strategy. However, some financing partners, such as Salal Dealer Direct, offer standard programs with zero dealer fees.
- Confusing to Implement: Implementing a customer financing program can be complex and a lot to learn and manage, particularly for small businesses that may not have experience with such programs.
Now that we’ve discussed the pros and cons of offering customer financing, it’s time to dive deeper into the various financing options. Each option has unique features and considerations, so it’s essential to evaluate them carefully to determine which aligns best with your business goals and customer needs. In the following section, we’ll explore in-house financing, dealer financing, and third-party financing, providing you with the information you need to decide on the best option for your business.
Three Ways to Offer Financing to Customers
In-House Financing: This option involves extending credit directly to your customers, allowing them to pay for their purchases in installments. In-house financing requires careful management of credit risk and can be resource intensive.
Dealer Financing: This type of financing involves partnering with a financial institution or lender who provides the financing to your customers on your behalf. You act as a middleman between the customer and the financial institution in this arrangement.
Third-Party Financing: Third-party financing involves your customer working with an outside company that specializes in consumer financing. These companies typically offer a range of financing options, allowing customers to choose the best plan for their needs. However, this option can increase the time to close for the sale.
Partner Forward with Salal Dealer Direct
We team up with contractors nationwide to help them offer financing to customers for various solar and home improvement projects.
We can offer some of the most competitive rates and dealer fees because we’re part of a member-owned credit union. That means our profits return to our members—and business partners—through lower rates and fewer fees.
Our Dealer Direct Financing programs feature:
- An online loan application with fast credit decisions and a high approval rate.
- Terms and loan amounts are available to fit various budgets and project sizes.
- Partners pay ZERO dealer fees on our standard program.
How to Start Offering Salal Dealer Financing to Customers
We’re serious about helping your business grow with fast funding times and personalized support from a dedicated and experienced team of lending specialists. To get started, our dealer application process requires these documents:
- Completed dealer questionnaire
- Current income statement and balance sheet
- Copy of business license and/or contractor’s license
