Offering in house financing to your customers can boost your sales, improve customer loyalty and build a repeat clientele. In fact, the average order size of a small business that offers customer financing can increase as much as 120%. And nearly two-thirds of customers make an additional future purchase of $500+ in stores they receive customer financing from. In this article we’ll show you how to offer customer financing without breaking the bank and discuss:
- How Customer Financing Works
- The 4 Most Important Considerations when Offering Customer Financing
- How to Use Blispay to Offer Customer Financing
- Other In House Financing Options
- How to Reap the Benefits of In House Consumer Financing
Our thanks to Blispay for sponsoring this article. Blispay offers customer financing that is free to merchants and can be used by any merchant who accepts Visa payments. Well qualified borrower’s can get approved in minutes for up to $10,000 and use the financing for in-store purchases or online. Merchants can get up and running with Blispay in a little as 1 day.
How Customer Financing Works
Customer financing is designed to convert a browser into a buyer. It is targeted at potential customers who are on the fence about buying goods or services from your business because they are deterred by the upfront payment. Customer financing allows the customer to be enrolled in an affordable monthly payment plan, so they don’t have to pay all at once.
Offering customer financing can help you make larger sales, make sales more often, and increase customer loyalty.
Increase Sales, Average Order Value, & Customer Loyalty
Customer financing is often successful at getting customers to make add-on purchases as well. This increases the customer’s average order value (AOV).
“Results vary across industries, but our merchants are reporting AOV lifts as high as 120%” said Greg Lisiewski, the Founder and CEO at Blispay, a company offering customer financing. “Some are also seeing reuse rates upwards of 30% within the first 90 days”
The graphic below shows the steps involved in offering customer financing.
Now let’s look at the 4 most important things you should consider if you are thinking about offering financing to your customers.
The 4 Most Important Considerations when Offering Customer Financing
There are 4 questions to address when considering a new customer financing program:
- Cost to the Merchant to Offer Customer Financing
- Will Your Customers & Goods Qualify for Financing
- Will Your Customers Like the Financing
- Is the Customer Financing Easy to Implement & Scale
1. Cost to the Merchant to Offer In House Financing
What the financing costs your small business is the most important aspect of choosing your partner. If the margins don’t make sense because the financing product is too expensive for your business, there’s little point in offering it to your customers. There are three different ways that the financing company typically charges merchants:
- No Charge – There are a limited number of financing solutions that are completely free for the merchant.
- Discount rate – Most financing companies charge the small business owner a percentage (1% – 5% is typical, but it can be higher) of each financed sale. For example, if a customer receives financing to purchase a $5,000 sofa from your shop, a discount rate of 3% is applied, $150 is deducted from the purchase. You would receive $4,850 but your customer owes $5K plus interest.
- Flat rate – Some firms charge a flat monthly rate, which covers an unlimited number of customer applications for financing. The average is around $40-50/month. There may also be a one-time initial setup fee.
While a flat rate may be acceptable to your business, a discount rate might be tough depending on your margins. An option that is free to the merchant, like Blispay, is the best choice if it also works with the other considerations below.
2. Will Your Customers & Goods Qualify for Financing
Financing companies have slightly different qualification requirements. These qualifications extend to both your customer (their credit profile, employment status, etc) and to the products and services your small business offers (type of product/service, cost of product/service, etc). Here are some things you should consider when deciding which financing company is right for you:
- Can your customers qualify?: Many financing companies are going to require your customers to be a prime or a prime-plus borrower. This typically means having a credit score above 650 with no recent negative credit events, like bankruptcy or foreclosure. There are also low credit customer financing and no credit check customer financing options available, but they will be more expensive for both the merchant and the customer.
- What are the spending requirements?: Is the required purchase amount on a single transaction going to work with your products? For example, some finance companies will set a minimum purchase of $1,000 while others will be much lower. Blispay does not have a minimum purchase amount. Purchases of $199+ can qualify for a no payments, no interest if paid in full in 6 months promotion.
- Can the financing be used to purchase my products or services?: Some financing is restricted to specific products, services, or industries. Blispay is one option that can be used to purchase just about anything.
The last thing you want is to waste time integrating a customer financing program that doesn’t fit your clientele or the products or services you sell.
3. Will Your Customers Like the Financing
There is no point to offer a customer financing solution if your customers don’t like and use it. Keeping in mind what your customers value is important in the process of picking your provider. The two main things that your customers are likely to find valuable to them are:
- Cost of Financing
- Financing Flexibility
Cost of Financing to Your Customers
Offering financing is most valuable for your business if it’s affordable for your customers. Although it’s the financing company that is actually lending the money, your customers may have your business in mind every month when they pay the bill. To ensure your customer’s continue to see your business in a good light, finding the customer financing option with the best possible rates is essential.
Most financing firms offer customers APRs ranging from 5% – 20%, but some are as high as 29%. The exact interest rate that your customers will qualify for depends on the company that you’re using and the customer’s credit score. For eligible borrowers, the financing firm will also offer promotional incentives, such as 0% interest for 6 months.
Is the Customer Financing Flexible?
Many businesses that offer customer financing do it to keep business in their store. While that may be a good strategy, there are also benefits to offering financing options that are more flexible.
For example, customer financing that can be offered in your store but used anywhere that Visa is accepted makes it a much more valuable consumer financing tool. This is especially true if your business doesn’t sell goods or services that people buy on a regular basis. If your customer financing can provide a potential benefit for every purchase, not just yours, your salespeople will have an easier time promoting the product.
4. Is the Customer Financing Program Easy to Implement & Scale
Small businesses will want a customer financing solution that is easy to implement, doesn’t require a lot of training, and doesn’t require you to spend money on new technology. As your business grows, low technology and training requirements will make it much easier to scale.
The best customer financing solutions will also work no matter how your business grows. Ideally, customer financing should help you increase sales across all platforms, including at your brick and mortar store, ecommerce store, mobile, and any popup locations or conventions.
“We understand how tough it is for a small business owner these days” said Greg Lisiewski, the Founder and CEO at Blispay. “Every dollar matters and so does every minute of effort. By building Blispay as a Visa product, we instantly empower millions of merchants to improve sales with minimal effort and no additional cost. They get to keep running their business as they do today.”
Using Blispay to Offer Customer Financing
Blispay’s customer financing program is a great option for a wide range of merchants. They work with small, single-store businesses, ecommerce-only sites, and large retail chains. They work best for B2C businesses with customers that are primarily based in the U.S. Let’s take a glance at the details of Blispay’s product offering in the table below.
Blispay Customer Financing Program at a Glance
|Time for Merchants to Qualify||As quick as 1 day|
|Merchant Fees||No additional fees
(Beyond your normal merchant fees to accept Visa cards)
|Technology Required by Merchant||No additional technology if you accept Visa cards already.|
|Employee Training Required||Minimal|
|Typical Type of Approved Borrower||Prime and Prime Plus|
|Credit Line Amounts||$1,000 - $10,000|
|Promotional Details||No Payments, No Interest on all purchases over $199 if paid in full in 6 months.|
|Time for Customers to Qualify||A few minutes, and it can be done from their phone right in the store.|
|Customer Application Process||
Blispay Customer Financing for Merchants
Here are additional details on Blispay’s customer financing program:
Blispay Application Process for Merchants
It’s easy for merchants to offer Blispay. You will fill out a short online form and a Blispay representative will get back to you with the details of the program and help answer any questions you have. Then you’ll sign a simple merchant agreement and review the guidelines of the program. Merchants have launched Blispay in as fast as 1 hour.
How Merchants Accept Payments from Blispay
Once a customer is approved for Blispay financing (which takes minutes), the merchant can process payments through their own point of sale (POS) in 3 different ways:
- The merchant can manually type in the customer’s new card information that they receive on their mobile phone.
- The merchant can take a mobile wallet payment if the customer has added their Blispay card to their Apple Pay, Google Wallet, Android Pay, or Samsung Pay app.
- The merchant can swipe Blispay’s physical card like a normal Visa card after the customer has received it (this could take a few days to receive).
When the customer is approved for financing they will receive a temporary card on their phone or mobile device that looks like this:
Processing a Blispay payment is quick and easy for the merchant. It can be completed immediately after the customer gets approved. Since it’s just like processing any other credit card payment, there’s no new, complicated processes that employees must learn. It’s virtually fool proof.
Blispay Works with Businesses of All Sizes
Blispay is extremely flexible and works with merchants of all sizes. Blispay works for business with a single location and limited sales and businesses that run a regional or nationwide chain of stores. It even works for your online and mobile sales. All you need is the ability to accept Visa payments.
“Blispay enables merchants of all sizes, across various industries to provide their consumers with financing at no additional cost” said Greg Lisiewski, the Founder and CEO at Blispay. “It doesn’t matter if you’re a bike shop doing $300,000 in sales a year or an 8 store furniture chain with $75,000,000 in annual sales. Blispay is the simplest solution for everyone.”
Blispay Customer Financing for Your Customers
Now let’s look at how Blispay works for your customers. Blispay’s customer financing is easy for customers to apply for. Your customer just needs to fill out a simple online application with the basic personal information that would be needed for any credit card application. Here is what the application looks like on a smartphone:
Once the application is completed and the card agreement is accepted, then the customer will immediately know if they have been approved. Here is what their welcome screen looks like when they have been approved, with their new account details:
From here all the customer has to do to start using their financing account is click the make a purchase button to get their virtual card. The virtual card will have the payment information the merchant needs to complete the sale.
All customers who make purchases with Blispay currently get no payments and no interest on all purchases over $199 if paid in full in 6 months. Also, customers will get 2% cash back on all purchases, regardless of the purchase amount. Cash back comes in the form of an automatic statement credit. They can get the same 2% cash back on their coffee as they get on the sofa they just bought in your store. It’s also easy for the customer to see where they stand on these offers at any time.
Blispay Customer Financing Details
Let’s look at a breakdown of the details of Blispay’s financing for the customer.
- Blispay is for prime or prime-plus borrowers
- Customers can be approved for lines of $1,000 – $10,000
- Customers get no payments & no interest on all purchases over $199 if paid in full in 6 months
- Customers will get 2% cash back on all Blispay purchases
- The APR is 19.99%
- Customers can qualify in minutes and start using it immediately
- Customer can use Blispay anywhere Visa payments are accepted
Blispay offers a flexible financing option with many benefits that your customers will love. It is easy to apply for, and even easier to use. Customers can be approved within a few minutes and make purchases in your store immediately. Visit Blispay to get setup and start offering Blispay as quick as today.
Other In House Financing Options
While Blispay will be a great fit for most merchants that are ready to offer customer financing, there are certain situations that will require other financing tools.
If a large share of your customer base is made up of subprime borrowers (those with a credit score below 650) you may want to look into low-credit customer financing options or even no credit check customer financing options. In general, these options will be more expensive for both the merchant and the consumer. Additionally, those options may have greater limits on the products or services that can qualify for financing.
Also, certain industries lend themselves well to special customer financing solutions. For example, the home improvement industry (like solar panel installation) often has industry specific customer financing options. If you’d like to find out which financing solution is popular in your industry, a good place to start is by asking other small business owners in your industry.
If you process a significant portion of your sales through PayPal, it may be more convenient for your customer base to use PayPal’s customer financing program.
DIY Financing vs Using a Financing Company
A lot of small businesses that want to offer financing to their customers start out by thinking, “Why can’t I just do this myself?” You can do it yourself, but there are three main reasons to hire a financing firm:
- Using your own money to provide credit to customers ties up your small business’ cash flow.
- Lending to customers on your own can get complicated. It takes time to keep track of all your customers’ credit transactions and to follow up with customers who don’t pay on time.
- A business that provides consumer credit needs to comply with multiple laws and regulations. You need to comply with these laws even if you use a third party service, but hiring it out makes things easier (for further information about these laws, read this article, and consult an attorney).
Using a financing company frees up your time and money for what you do best: running a great small business.
How to Reap the Benefits of In House Consumer Financing
Increased sales and customer loyalty are the main benefits of offering customer financing.
Here are 4 way to make the most of your customer financing program.
1. Advertise It!
If your customers don’t know that you’re offering financing, they won’t be able to take advantage of it, and you’ll lose out. Research shows that 68 percent of purchasing decisions are unplanned.
“Customers typically do not respond well to high priced items if they are not first aware that they have payment options” said Jocelyn Caster who offers customer financing at her small business, Wyncode. “Making it clear in your marketing materials, in-store advertisements, and online through social media is important for customers to be more open to making these purchases. Make sure your offer is written in plain language and that it can’t be missed.”
Putting prominent signage about financing options in your store windows, on the sales floor, and at the point of sale can convert a browser into a buyer. You should especially emphasize if you’re offering a promotion, such as 0 % interest for 6 months.
In addition, you should put banners on your website if you’re offering credit to online shoppers. Your customer financing partner should be more than willing to help you with these. Blispay, for example, provides all of these materials for you and helps you get set up as soon as you are an approved merchant.
2. Change Your Price Tags.
Your ultimate goal is to show the customer that your good or service fits their budget. In addition to having the full price of an item on the price tag, such as $1,000, show the lowest installment payment on the price tag (e.g. payments as low as $30/month). That way, your customers can see just how affordable the financing can be.
3. Train Your Staff
Your employees are your biggest partner in promoting financing. Your employees should be trained in how to initiate the topic with customers, how to submit an application for approval, and how to answer customer questions and concerns. When choosing a company to work with for customer financing, make sure that the application process is convenient both for your customers and employees.
4. Incentivize Your Employees
You know from the information above that you are going to get larger sales when customers sign up for financing. You can find ways to incentivize your employees to offer your financing solution because you know your business will benefit from it. Giving any incentive, no matter how little, can go a long way in making your customer financing program more successful.
In today’s economic climate, many customers do not have the available funds to make large purchases and may need some help. Small business owners can see their sales increase substantially. It is a system that is proven to increase sales if the financing product matches your customer’s needs.
Blispay offers customer financing to any type of company. It doesn’t matter whether you are a small brick and mortar shop or a multi-million dollar e-commerce store. Merchants can accept payments through Blispay just like they do any other Visa credit card, and can be set up as quickly as today. Visit Blispay and see how much your AOV goes up.