Ensuring a healthy cash flow is a delicate balancing act between monitoring outgoing expenses and tracking incoming revenue. For new and small businesses, however, all it takes is one or two outstanding customer balances to create a big strain on cash flow, which can threaten to grind operations to a halt because of the lack of inbound revenue. In order to ameliorate this situation, some businesses have started offering consumer financing.
How Consumer Financing Works
Consumer financing is a revolving line of credit that you can offer to customers, specifically for purchases made from your business. This allows customers to make larger purchases, and then spread the cost over monthly payments, which eases their own personal cash flow. One of the reasons many invoices do not get paid by customers is that the total amount due at once will severely eat into the amount of money they have available. Consumer financing offers a middle ground so that customers can remain solvent, and your business still gets paid regularly.
Easy To Set Up
Consumer financing is incredibly easy to set up, and applications can be processed over the phone while customers wait or shop around. Business owners simply partner with a commercial financing company and they will implement the necessary steps to handle phone calls, run credit checks, and determine the amount of financing your customers will receive (which is based on their individual credit scores). The financing company will also make arrangements to handle financing payments from customers – either in house, over the phone, or online – making the entire process easy and efficient for everyone.
Another big advantage to consumer financing is being able to offer incentives to customers in order to get them to sign up. Things such as no interest for the first six months after signing up, or cash rewards can be extended to draw in existing and new customers. This has the added benefit of expanding your customer base by offering easy financing options.
What Businesses Use Consumer Financing?
It used to be that consumer financing was only relegated to automotive dealerships and large department stores. In the past few years, however, we have seen construction companies, IT startups, niche businesses, and even medical facilities offering consumer financing to cut down on outstanding customer balances by spreading payments out across smaller monthly payments. Those businesses not only see an increase in sales, but they gain a positive reputation for being more “wallet friendly” than their competitors.