Benefits of Consumer Financing for Merchants

Updated on March 28th, 2022
Benefits of Consumer Financing for Merchants

Contractors and allied vendors benefit strongly from offering consumers and other customers a financing option.


According to Bankrate, only 4 out of every 10 Americans can afford to spend $1,000 at once. That's roughly 39%.

With anything past that price point, you have already cut yourself off from serving more than half your potential market. Even with the best salespeople offering the best solutions that obviously benefit the customer, you can’t get blood out of a stone: If the customer can’t afford it, you’re dead in the water.

Customer Financing for Merchants

But if you can answer the price objection with an easy and affordable customer financing program, you are right back in it, and chances are excellent you will have a new customer. 

Now, here’s another statistic: 76% of customers are more likely to make a big ticket purchase if you offer a seamless and convenient payment plan.

See, they can afford your products and services – just not in cash. Offering a consumer financing solution allows your customers to ‘cash flow’ their way into being able to make the purchase.

Consumer financing helps you help your customers increase their purchasing power. That’s’ a win-win solution for everybody. 


Customer Financing Increases Average Ticket Size 

When you offer financing to customers, you’re likely to increase your ticket size, or average order value (AOV).

The order value is the total value of an order placed by a customer, including all of the products and any add-ons.

In addition to opting for add-ons, when customers have the option to finance their transactions, they may also choose to purchase the more expensive/advanced versions of said products.


Consumer Financing Increases Sales

Research shows that closing ratios run between 5% and 20% for new customers. But for existing or returning customers, closing ratios increase to 60% to 70%.

When you offer customer financing, you can convert more of those new prospects to existing clients – and help those existing clients afford bigger transactions. They know your worth. They know what to expect from you. And they know you can help them afford it. 

As a business owner, offering equal monthly payments or other financing options and financing solutions to your customers can boost customer satisfaction, loyalty, and boost your cash flow.

Once the customer signs the financing agreement and confirms the sale, you receive full payment on financed transactions upfront. Your customers pay monthly payments that they can afford.


Differentiate Yourself From the Competition

Consumer financing is a proven effective differentiator in advertising. We’ve all seen car companies and dealers lead with customer financing programs:

  • “Zero interst financing!” 
  • “Low down payment!” 
  • “90 Days Same as Cash!” 
  • “Everybody Gets Approved”
  • "Four equal monthly payments!"


If it weren’t effective, they wouldn’t do it. 

Offering consumer financing can help differentiate you from the competition, build customer loyalty, and help you stand out. 

If you have a great financing provider in your corner, it makes sense to shout it from the rooftops.


Don't Rely on Bank or Credit Card Financing

The problem with traditional financing companies - banks, credit unions, and credit cards, is that they frequently won't approve customers with a less-than-pristine credit history. Or in the home improvement industry, they may want to hold the customers' homes as collateral.

Credit cards often don't have a high enough credit limit to be realistic customer financing options.

Instead, when you offer customers a payment plan through a good third-party financing company, you can offer realistic and affordable payment plans to customers with a more challenged credit history, and with a variety of credit scores. By partnering with a third-party provider, you can offer financing in house, level the playing field against your larger competitors, and generate increased sales to

Offering payment options can help small businesses increase sales,

By offloading collections and accounts receivable department to third party providers, and customer financing platforms, you get paid upfront, also reduce your legal responsibilities and legal risks, while significantly improving your business's cash flow - a key component of running a successful business.

Meanwhile, when you provide consumer financing through third-party financing companies may help you reduce or eliminate credit card discount rates and transaction fees, and reduce your exposure to chargebacks.


Tips for Boosting Consumer Financing Awareness

  • Let the customer know that they don't need to look for an outside lender. You already have a financing partner. 
  • Let them know that the application process is straightforward, and they can do it online. (It's always better to go with providers that have the online option.)
  • Let them know that the loan amount depends on their credit score, but also let them know that, unlike their credit card company, there’s no limit. 
  • Have a privacy statement on your Website and on your financing agreements. Make sure your customers know you respect their privacy and will safeguard their consumer credit information.
  • Let them know that approval rates are higher than with other types of lenders – especially bank lenders (Inform yourself about additional details with your provider.)


Sara Hafeman

With years of experience in the consumer financing industry, Sara Hafeman currently leads marketing and partner development at Time Investment.