How To Choose The Best Consumer Finance Programs For Retailers
Different strategies can help steer a business to success. Some approaches involve aggressive marketing, while others feature selling on credit or retail consumer financing. Retail consumer financing can be through an owned financing program or a third-party consumer financing program.
In the case of third party consumer financing, a business needs to choose from different programs. How to choose the best consumer finance program for retailers can be a difficulty. In this post, we feature essential factors to bear in mind when selecting consumer finance programs. Therefore, if you are unsure about which plan to choose, here are crucial factors to bear in mind.
Ability To Identify Good Customers
There is a need to access data in the modern business world to see and accept more customers. Access to data and intelligent systems to analyze the information is a more efficient approach for reducing risk. This applies even when choosing a platform that will allow your business to offer consumer financing.
Therefore, when choosing a consumer finance program, a key factor is whether the platform supports what we can refer to as an accelerated insight platform. Generally, this refers to the ability to predict credit, confirm the customer’s identity, and reconcile payments with intelligence. Therefore, through a platform that offers accelerated insight platform, a business can identity, verify, and say yes to more profitable customers.
Essentially, it refers to the ability to predict customers’ creditworthiness and revive rejected loan applicants. Besides, the platform should read and upload the customer identity details and confirm their legit customers. Similarly, the platform should maximize supplier revenue and automate the distribution of payments.
Is The Program Available To All Your Target Customers?
Before settling on a specific consumer-financing program, it is essential to evaluate whether the program is available to all your customers. You may find that particular programs are available to global customers, while others suit only the local customers. Therefore, if you target global consumers and look to offer credit to customers, a local customer financing program does not fit your business.
Therefore, come up with available options, and research the availability to your target customers. Bear in mind that legislative guidelines may restrict the ability to offer credit to specific customers.
In some cases, customers may not like specific customer-financing programs. You can tell preferred credit programs by evaluating online reviews. What do past customers say about a particular program? Note that consumer-purchasing behavior is influenced mostly by what their peers say about a specific brand. Thus, if you end up selecting a program that has a negative reputation, you may not achieve much success. Likewise, choosing a program that is popular among customers attracts more success opportunities.
In-house Financing Program Vs. Third-Party Customer Financing
Either of the two comes with their challenges and opportunities. It is upon the business owners to evaluate either program’s performance to ascertain whether it meets specific goals or objectives. Here is an overview of what you may need to know about the particular programs.
● In-house Customer Financing:
This is where the merchant takes all the financial risk and reaps all the financial rewards. Therefore, the merchant lets the consumers walk away with his merchandise before the customer makes the full-payments. The in-house customer-financing program requires that business owners understand their cash flow and create financial projections. If your customers begin buying more and honor the repayments, your cash flow will eventually increase after an initial dip. Unfortunately, if the customers do not pay, the merchant is at risk of facing bad debts.
● Third-Party Customer Financing
Now that cash-flow and lousy debt are some of the negatives associated with lending through an in-house program, you may consider the alternative.
Many companies are offering consumer-financing programs suitable for retailers. These are third-party programs crafted to help businesses increase revenues. However, you may have to pay a fee for the third party involved to extend credit to your customers.
Evaluate Associated Costs, Terms And Conditions
If you continue to be interested in third party customer financing programs, be sure to verify the fees associated. Therefore, some of these companies may charge you nothing for sending a customer to them. However, others may charge a fee or interest for your customers to obtain funding.
Besides the costing model, some terms and conditions apply to these programs. For instance, where no fee is charged to the merchant, there may be a requirement to take care of all legal and operational complications. For those that charge a fee, the customer financing company may exempt the merchant from any legal issues that occur when a third party offers customer financing for you.
Choosing to offer credit to customers is an opportunity for your business to excel. However, more needs to be done, starting with ensuring you select the right retail consumer-financing program. Therefore, before you make any mistakes, consider the factors we have highlighted above.