How to Offer Financing to Customers as a Small Business – Updating

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Reading How to Offer Financing to Customers as a Small Business – updating 2022

Customer financing is a way of letting customers pay for goods or services in installments rather than up front. When you offer financing to your clients, you make your services more affordable and put their dream jobs within reach.

Best of all, while clients pay over time, you get paid in full once the job is done. It’s a great way to increase sales and impress your customers—all without sacrificing your cash flow.

Read on to learn more about consumer financing, how much it costs, and how you can offer financing to your customers.

What is customer financing?

consumer financeor customer financing, allows customers to pay for a product or service over time rather than upfront. It offers your customers an easier payment option when they want a service but cannot afford the total price right away.

When you offer customers financing, you get paid for the job as soon as it’s completed. In the meantime, the customer pays for the order in smaller instalments, each month, until it is paid in full.

For example, you could have a customer pay for a $1,500 HVAC job in five monthly installments of $300.

By offering consumer finance, service companies can secure more and larger jobs. Meanwhile, customers can get the service they need faster.

This is how consumer finance works

There are basically two ways to offer consumer finance:

1. You fund the payment plan yourself. This means that you carry out credit checks, offer financing and manage the collection yourself. This is called self-financing.

Typically, larger companies offer internal financing because they have the staff and resources to manage a financing program.

Self-financing is the riskier option. It comes with legal obligations as you deal with customer credit information. And it’s much more time consuming, especially if the customer doesn’t pay anymore.

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2. You use a consumer finance partner. This is the better option, especially for small businesses. The financing partner is responsible for the credit check, the preparation of loan offers, the collection of payments and the management of legal risks.

Here’s how it works: your client pays the partner, and the partner pays you in full once the job is complete. You don’t have to waste time chasing customers or suffering from poor cash flow.

When choosing a financing partner, pay attention to owner-friendly partners. For example, some partners offer no late fees, no prepayment penalties, or 0% financing over three months.

Consumer finance option on a jobber offer

Jobber’s field service software offers consumer finance through Wisetack. Clients can apply in minutes and receive an instant approval decision.

Why should I offer consumer financing?

Consumer finance makes your services affordable to more customers. Financing allows customers to get the services they want without worrying about paying a large fee at the time of billing.

Service companies in industries such as HVAC, plumbing, electrical, and tree care provide financing to customers because it helps them:

  • Look more professional and stand out from the competition
  • Remove barriers preventing customers from accepting an offer
  • Win more orders, close bigger deals and facilitate upselling

This lets your customers know in advance that they can pay in installments typically increases sales by 20%.

How can I offer financing to my customers?

Step 1: Tell your customers that you offer financing

First let your customers know that financing is possible. You can provide this information on your website or directly in your estimates and offers.

You can also let them know in person if they have raised concerns about their budget. If your partner offers integrated financing, the customer can apply directly from the offer.

Here’s an example of how you can use Jobber to offer partner financing:

Step 2: Customer applies for financing from partner

Your customer must apply for financing through your financing partner. In most cases, they run a credit check to determine if your customer qualifies.

Some partners let the homeowner see their options first, using only a gentle credit check that doesn’t affect their credit score. They perform a tough credit check when the customer decides to apply.

The partner will tell your customer if they have been approved or rejected.

Step 3: Start service work

Once your client is approved for financing and has agreed to the terms and payment terms, it’s time to shine. They provide the service ordered by the customer, whether it’s a new HVAC installation or a retaining wall.

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Step 4: The customer pays over time while you get paid in full

Once the service is rendered, you will be paid in full by the partner and the client will start paying their installments.

Your customer continues to pay the installments to the partner until their debts are settled.

Advantages and disadvantages of the financing offer for customers

Consumer financing is a great option for many businesses. To help you decide if this is a good option for you now, we’re going to break down the pros and cons of offering consumer finance.

What are the benefits of consumer finance?

  • Close more jobs. The biggest benefit of customer financing is that it removes barriers to selling. We examined price estimates with and without financing and found that offering financing typically increases sales by 20%.
  • Add value to your jobs. Facilitating the payment of jobs through customer financing options allows you to sell your higher-value jobs and packages. This increases your average ticket price – and boosts your bottom line.
  • Receive payment in advance. You don’t have to worry about customers paying bills when Consumer Finance routes payment to you instantly. This improves cash flow and makes it easier to keep your business running and growing.
  • Let your customers choose what they want. With no financial barriers, your customers have the opportunity to choose the best option for them, be it a package that improves the service they need or the specific products they want in their home.

CONTINUE READING: How detailed offers give you and your customers more control

  • Reduce hassle. With third-party consumer financing, you don’t have to worry about payments. Once a job is done, you can focus on the next instead of chasing down a down payment — and focus on growing your business.
  • Earn repeat business. When you offer an easy payment method, you encourage existing customers to come back to you as repeat customers. It’s easier to keep customers happy when you reduce the stress of making large payments.

CONTINUE READING: How to price your services as a small business

Disadvantages of consumer finance

  • tip. Debt financing providers often charge service fees per transaction or per month. Fees allow these companies to provide a convenient service to their customers. If you decide to offer financing to customers, make sure you choose a provider that doesn’t charge late or early repayment fees.
  • Minimum Transaction Amounts. Funding is designed for high-ticket services. Most consumer finance companies require a minimum transaction amount for a customer to qualify. So your clients may not be able to fund your lower-cost jobs.
  • customer acquisition costs. The service fees you pay your consuming finance provider add to the overall cost required to acquire a new customer – that’s your Customer Acquisition Cost (CAC). Conduct a cost-benefit analysis to calculate whether financing is a viable option for your business.
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Offer financing to customers Jobber

How do I know if consumer finance is right for my business?

Here are some indications that you should offer consumer finance:

  • They offer services at a high price. If your average service costs $500-$1,500, offering customer financing can help put big purchases within reach.
  • You want to differentiate yourself through customer service. By offering financing, you bring your customers’ dream jobs within reach. You will appreciate the convenient and flexible payment options, especially when your competitors cannot offer it.
  • You have services that you want to sell additionally. Upselling can help you generate more business from existing clients and jobs. Customer financing makes it easier to sell higher-priced items.

If your business doesn’t meet all of these criteria, you can still offer financing to your customers. Especially if your customers have asked for it or if you think it can help you get more sales.

CONTINUE READING: How to generate more sales with new customers

How much does customer financing cost?

Business owners face a 3% to 6% fee on every transaction. This is to keep the costs for the homeowner low.

Some financing partners may also charge you a monthly fee of up to $50 based on the number of transactions. Make sure you ask your partner for full payment terms before agreeing.

Meanwhile, your customers pay interest on the financed amount. Some financing partners can offer their customers 0% financing over three months.

To find out if you can recoup the financing costs from the additional income you generate, do a Cost-benefit analysis.

After completing this cost-benefit analysis, you should have a better idea of ​​whether offering consumer financing is a good idea for your business.

If you can consistently win bigger deals and increase sales by 20%, the fees can be well worth it.

Get started with customer financing for small businesses

Offering customer financing can make you look more professional, improve customer retention, and increase sales.

Best of all, your customers get the services they need, when they need them. That puts bigger and better jobs within reach.

Take the time to determine if consumer finance is right for your business. Talk to your customers, evaluate your costs and find the right financing partner.

So the article “How to Offer Financing to Customers as a Small Business” has end. Thanks you and best regard !!!

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