How to Offer Customer Financing: In-house Financing Without Breaking the Bank

Offering customer financing at the point of purchase can boost sales, increase conversions, improve customer loyalty, and drive repeat business. When a small business offers customer financing, its average order size can increase by up to 120%. Plus, nearly two-thirds of customers make a future purchase of $500 or more in stores that offer financing.

Thanks to ViaBill for sponsoring this article. ViaBill integrates with many popular ecommerce platforms so retailers can offer customer financing on their website. Shoppers can use ViaBill to pay in installments, making shopping more affordable. Retailers still get paid in full upfront by ViaBill, which assumes the fraud and credit risks. Ecommerce sites can install ViaBill same-day and see an 18% increase in conversion rate.

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 customers to enroll in an affordable monthly payment plan so that 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.

Here’s how customer financing works in six steps.

1. Let Customers Know About the Customer Financing Offer

Prominently advertise customer financing as a purchasing option. It can turn passive browsers into buyers, especially when it comes to big-ticket purchases and online shopping. If you’re an online store, display standard product prices and prices shoppers would pay upfront with financing. Also, offer financing to customers as a payment option at checkout, the same way you would display PayPal or Apple Pay.

If you’re selling in-store, have signage promoting financing as a payment option throughout the store. Of course, have signs at the point-of-purchase as well and train associates to inform customers of the option at checkout. While ViaBill offers online customer financing, they have a referral program for in-store customer financing.

2. Your Customer Applies for Financing

If you use a third-party financing solution, your customer doesn’t apply for financing directly through you. For online shoppers, when they select the financing option at checkout, they are directed to a quick questionnaire. For in-store financing, customers use their smartphone, tablet, or computer to apply for financing.

3. You Customer Gets Approved

Within seconds, your customer can know if they’ve been approved or denied for financing. If you’re using a financing partner like ViaBill that offers installment plans, your customer will be approved to pay nothing upfront. Other financing companies, typically used for in-store purchases, approve customers for financing for up to a certain dollar amount.

4. Customer Gets Offered Promotional Rates

If your customer qualifies, they’ll immediately receive special offers, promotional rates, or access to encourage them to use their new credit immediately to make purchases in your store. For example, ViaBill allows customers to pay nothing at the time of purchase and make four equal interest-free payments during the course of four months.

5. Customer Pays for Products

One of the nice features for you as a merchant is that you’ll receive full payment for the items you sell up front. Once your customer has been approved, they’ll use a unique identification number or barcode to pay for their products. The financing company will pay you the same way you get paid with any other credit card purchase.

6. Customer Takes the Product Home and Makes Monthly Payments

Products purchased with customer financing take the same time to process as other payments. They’ll be rung up at your register or on your ecommerce site the same way as any other credit or debit card purchase.

Once payment is complete, the customer will take home the products they’ve purchased, or you will fulfill their online order as usual. Then customers will make monthly payments to the financing company.

With ViaBill your customers can be instantly approved for interest-free financing. They pay nothing at the time of purchase and make four monthly payments to pay the balance in full within four months. There’s no cost to the retailer other than a standard transaction processing fee (2.9% + 30 cents), plus retailers receive full payment upfront, and ViaBill assumes all risk.

How to Determine if Customer Financing Is Right for You

As a retailer, you’re being hit by competitors from every direction. All of them want to take sales from you, whether it’s online or in your store. Offer financing to customers as a way to stand out from competitors.

While offering a customer financing program might be a no brainer to compete with department stores and big-box stores, you need to make sure it’s the right thing to do for your business. Plus, you need to make sure you’re implementing something you can afford.

Here are four things to consider when determining if a new customer financing program is right for you.

1.The Costs of Offering Customer Financing

Potential costs and fees are the most important factor to consider when choosing your customer finance 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 limited financing solutions that are completely free for the merchant, but this is the best case scenario option. To be completely free, the program would need to use your current point-of-sale (POS) system or ecommerce platform, and the fees on each transaction can’t be higher than what you normally are charged to process a customer payment.

ViaBill is a great option that doesn’t charge the merchant anything more than you’re already paying for an online credit or debit card transaction. ViaBill can easily be integrated with your existing ecommerce platform like Shopify, WooCommerce, or Magento in less than 24 hours.

Discount Rate

Many financing companies charge small business owners a percentage ― 1% to 5% is typical, but it can be higher ― of each financed transaction. For example, if a customer receives financing to purchase a $5,000 sofa from your shop, a discount rate of 3% is applied, and $150 is deducted from the purchase. You would receive $4,850, but your customer owes $5,000, 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 to 50 per 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 doesn’t add any other costs beyond what merchants currently pay to process credit cards, like ViaBill, is the best choice when offering a financing program that helps your customers.

2. Whether Your Customers & Products Qualify for Financing

Financing companies have slightly different qualification requirements. These qualifications extend to both your customer, such as credit profile and employment status, and to the products and services your small business offers like type of product or service, cost of product or service, and so on. For example, ViaBill does not run a credit check on customers or need employment verification, and their financing program is available for most product categories.

Here are some questions you should ask 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.

Other financing companies, like ViaBill, don’t run a credit check to approve customers. The financing amount offered is usually lower, but approval odds are higher. All a customer needs to apply is their name, phone number, and a credit card.

What Are the Spending Requirements?

Is the required purchase amount on a single transaction going to work with your products? Some finance companies will set a minimum purchase of $1,000 while others will be much lower. For example, ViaBill does not have a minimum purchase amount.

Can the Financing Be Used to Purchase My Products or Services?

Some financing is restricted to specific products, services, or industries. ViaBill is one option that can be used to purchase just about any online item. Other financing programs may restrict customers from buying some or all of your products or services with their financing.

3. Whether Your Customers Will Use the Financing

There is no point to offer a customer financing solution if your customers don’t like or 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 are the cost of financing to your customers and the flexibility of customer financing.

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 lending the money, your customers may have your business in mind every month when they pay the bill. To ensure your customers continue to see your business in a good light, finding the customer financing for small business option with the best possible rates is essential.

Most customer financing firms offer customers annual percentage rates (APRs) ranging from 5% to 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 six months.

However, as mentioned earlier, there are a few exceptions that do not charge customers any interest or extra fees. There are also a few financing companies that can extend smaller loan amounts like for online clothing purchases without having to run an official credit check. ViaBill offers both of these benefits.

Is Customer Financing Flexible?

Many businesses that offer customer financing do it to keep business in their store and on their website. 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 credit cards are accepted makes it a much more valuable consumer financing tool. If your customer financing offer can provide a potential benefit for every purchase ― not just yours ― your salespeople will have an easier time promoting the product.

4. Whether the Program Is Easy to Implement & Scale

Small businesses 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. This makes it more affordable to get up and running, and as your business grows, the minor point-of-sale and training requirements will make it much easier to scale.

The best customer financing for small business solutions will also work no matter how or where 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.

“It shouldn’t be a hassle to offer customer financing. Neither should it take dollars or time from your other projects. That’s why we have spent all our time integrating with the software businesses are already using. So every business can offer customer financing within the day — so they can get back to running your business.”

― Kristian Niedoborski Thøgersen, Chief Commercial Officer, ViaBill

Using ViaBill to Offer Customer Financing

ViaBill customer financing program is a great option for a wide range of ecommerce businesses. ViaBill works with startups, independent sellers, large retailers — ViaBill is a great fit for ecommerce businesses of all kinds.

ViaBill Customer Financing Program at a Glance

ViaBill Customer Financing for Merchants

ViaBill is one of the easiest customer financing solutions for ecommerce businesses to implement. You can be up and running within 24 hours and start marketing the option to your customers. No ecommerce platform or shopping card upgrades required.

ViaBill Application Process for Merchants

To get started, you will fill out a short online form, and a ViaBill 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.

Once you are approved for ViaBill financing, you can seamlessly integrate ViaBill payments onto your ecommerce platform if you use one of ViaBill’s existing 30 partners. If you use a different system, ViaBill can help you set up a custom integration on your website.

Here are the three basic steps for processing a customer order with ViaBill:

1. Customer selects ViaBill as their payment method at checkout: Customers will be taken to a ViaBill-hosted site to complete the quick application process, instantly approved or denied, and then can resume their normal checkout.
2. Merchant notifies ViaBill of purchase: Ecommerce sellers or their payment processor or ecommerce platform notify ViaBill of the customer order.
3. ViaBill pays merchant: ViaBill will deposit the transaction funds into the merchant’s bank account in five business days.

ViaBill Works with Businesses of All Sizes

ViaBill is extremely flexible and works with merchants of all sizes. ViaBill works for startup ecommerce businesses, small independent sellers, and large ecommerce chains.

“Contrary to some of the bigger financing companies ViaBill is built for everyone. No one should be left behind just because they aren’t doing $2 million in annual sales. Neither should a store with $75 million in annual sales be left out because they aren’t in a typical financing category. ViaBill is for everyone.”

― Thøgersen

ViaBill Financing for Your Customers

ViaBill’s customer financing makes it easy for customers to apply. Your customer needs to fill out a simple online application with their name, phone number, and credit card. No credit check required.

Once the application is completed and the agreement is accepted, the customer will immediately know if they have been approved. From here, the customer purchase will be completed using the approved financing. All customers who make purchases with ViaBill currently get no interest on initial applications and pay nothing upfront.

ViaBill Customer Financing Details

ViaBill is a great option for customers because they can use ViaBill payments for anything on your website. If customers use ViaBill to make purchases on other sites, their monthly installment payments are consolidated into one simple payment which can be managed through their account on ViaBill’s website.

Let’s look at a breakdown of the details of ViaBill’s financing for the customer:

• ViaBill is for any customer with a credit or debit card
• Customers pay no interest on initial borrow amounts
• Customers can qualify in minutes and start using it immediately
• Customers can use ViaBill to make purchases on multiple sites and manage their balance as one in their account on ViaBill.com

ViaBill 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 online store immediately. Visit ViaBill to get set up and start offering customer financing as quickly as today.

Other Customer Financing Options

While ViaBill will be a great fit for most online merchants that are ready to offer customer financing, there are certain situations that will require other financing tools.

ViaBill is for online businesses, so if you have a brick-and-mortar store, another customer financing option designed for in-store purchases would be a good fit for your business. There are solutions that will integrate directly with your point-of-sale system or payment processor. Some small business payment processors even offer customer financing directly.

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 sector, a good place to start is by asking other small business owners in your industry.

Benefits of Offering Consumer Financing

As a merchant, customer financing offers you many benefits, from giving you the ability to compete with larger retailers to increasing customer satisfaction and retention. If you can afford the right customer financing program, then the benefits make it a no-brainer to offer to your customers.

1. Increases Average Order Value

Consumer financing is often successful at getting customers to make add-on purchases, which increases the customer’s average order value (AOV). It also encourages customers to upgrade to expensive versions of products rather than settling for the more affordable product they can pay off immediately. A study from Retail Customer Experience paints this picture with actual data.

The majority of customers (66%) using financing that you offer them directly are going to come back and make an additional purchase of at least $500. That’s a benefit of current and future revenue that you wouldn’t have received otherwise, and it increases your average order size.

According to Thøgersen, “ViaBill increases the average order value by +33%, conversion-rate by +18% and doubles the average expected purchases from the customer.”

2. Free for You to Offer

If the program works with your current point-of-sale system or ecommerce platform, then it’s likely free for you to offer it. Not only does that mean you can be competitive by having a financing option for your customers, but it’s a competitive advantage over other retailers who have money tied up in their program.

3. Helps You Compete With Big-box Retailers

Offering a customer financing program is almost a must in today’s market, especially if you offer expensive products. Big-box retailers all seem to offer a financing option or store card with beneficial promotional offers. If you don’t offer customer financing to your customers, then you could be losing countless revenue dollars directly to these big-box retailers.

How to Maximize Consumer Financing Sign-ups

Customers respond very well to being offered incentives. However, if your customers don’t know about your financing program or don’t apply for it, then you won’t see the same results. You need to find ways to make your customers aware of the financing option while increasing the number of them that apply.

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% 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.”

― Jocelyn Caster, Coordinator, Wyncode Academy

Putting prominent signage about your financing options in your store windows, on the sales floor, and at the point of sale can convert a browser into a buyer. For online stores, displaying financing options on a top banner, on product pages, and at checkout will help encourage shoppers to buy. You should especially emphasize if customers can qualify for a promotion.

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 like payments as low as $30 per month. That way, your customers can see how affordable the financing might be. If you use ViaBill, they have a feature that can automatically display installment prices of each item on the product page.

3. Train Your Staff

Your employees are the most important asset in promoting any customer financing offer. Your employees should be trained on 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, make sure that the application process is convenient for both your customers and your employees.

4. Make it Easy

If you sell your products online, then you need to make sure your customer financing offer is built into your ecommerce site and store cart. Before your customers check out, your site should show the customer what their payments could be automatically if they used customer financing. Better yet, you should show them what the payments would look like for an upgraded model of the product they’re buying.

Customer Financing Frequently Asked Questions (FAQs)

What is customer financing?

Customer financing is when customers pay for a product or service in installments or with credit instead of paying the full amount upfront.

Do customers need to undergo a credit check?

Some customer financing programs requires a credit check to approve customers. This is typically required for larger purchases or credit amounts. However, solutions such as ViaBill do not require a credit check.

How do I get paid when customers use financing?

With ViaBill, and with most customer financing solutions, retailers still get paid the full amount upfront, even though customers pay in installments. The financing business pays the retailer, and then the customer repays the financing solution.

Bottom Line

In today’s economic climate, many customers do not have the available funds to make large purchases and may need some help to pay them off over time. Small business owners can see their sales increase substantially by offering this solution to their customers if what you offer matches the needs of your customers.

ViaBill offers customer financing programs for any type of ecommerce business big or small. Merchants can accept payments with ViaBill by integrating it with their existing ecommerce platform, and without paying anything other than a standard transaction processing fee. Visit ViaBill today and watch your conversion rate soar.