Customer Financing for B2B Business: Why It's Necessary

As a small business owner, you’re always looking to make your business better and retain customers. Offering customer financing at the point of purchase can help to accomplish this. In-cart financing options can boost sales, improve the size of orders, improve customer loyalty, and drive repeat business without impacting payment risk or working capital.

What is customer financing?

Customer financing is something to consider when you want to grow your business and accommodate customers who need more payment flexibility. It can help individuals or businesses with limited cash or credit cards to make purchases from you. Customer financing is designed to convert a browser into a buyer at the point of sale if they might not be able to purchase outright.

With customer financing, an individual or a business enrolls in a program where they can pay installments of the full payment over time. We’ll dive into the benefits of offering customer financing and some things you should consider.

Benefits of customer financing

With customer financing, your business can realize a whole host of benefits, including new customers and increased sales.

  • Sell to people who might not be able to buy otherwise, broadening your potential customer pool. For example, businesses with little credit history who are just getting started will be able to buy the products they need with enough time to earn capital to pay it back.

  • When you utilize a service or provider for customer financing, you are still paid upfront for the purchase. When you work with a platform with integrated financing or a third party financing provider, the provider guarantees every sale that is finances. Because they take care of the details, you don’t have to worry about not being paid back. Many software programs and point of sale providers/shopping carts have customer financing integrated.

  • You can also earn interest, offer better prices, and increase customer satisfaction. Interest is a possibility if you bring the financing in-house and can decide your own interest rate, but by offering financing to customers you can display upfront prices that are lower and more attractive as a result.

Considerations of customer financing

By offering customer financing, you will likely face more accounts receivable. If you offer customer financing yourself, you will have to calculate the cost of the increased size of your accounts department to accommodate. This is why working with a provider that has integrated customer financing options is a good option.

How does customer financing work for small business?

There are numerous ways to make customer financing work for you as a small business. Here are some best practices:

  • Let your customers know about your financing option.

  • Advertise it in cart as well as elsewhere.

  • Use it as an upsell or tangential service offering for your existing customers who might benefit from it, especially B2B customers who make repeat or bulk purchases through global trade, trade finance and letters of credit who might benefit from it.

It’s important to advertise financing options that you offer, as they can turn potential buyers who are researching and weighing their options into customers, especially when it comes to bulk orders or trade transactions especially if this is the first time they have come across your business or purchased from you.

The Process:

1) The customer applies for financing either within cart or through a different process with a financing platform. Depending on what financing provider or system you use, this process might look slightly different (especially for export financing with international buyers). Generally, your customer doesn’t apply for financing directly through you, but instead through a third party.

2) The customer gets approved for financing. Your customer will know within a few minutes if they are approved or rejected for financing, so they can complete their purchase. Approval is determined by the bank or exporter bank who determines the credit or supply chain finance terms. From there, they extend a line of credit with payment options just like a rewards card or secured card. Customers also get offered promotional rates like 0% interest or other promotions your provider might offer.

3) The customer pays for the order and receives the order while committing to make monthly payments.

Is customer financing right for my business?

Providing in-cart financing for your B2B buyers can allow you to stand out amongst your ecommerce competitors, and can allow your buyer to make quicker and easier purchases. It’s important to make sure you’re implementing something that your customers want, and that you can afford. Here are some things to consider before implementing.

  • Costs: A financing company will typically charge merchants in one of a few ways. It might be free if the program uses or is integrated into your POS (point of sale) system or your ecommerce platform, but it also might charge business owners a percentage of each transaction that is financed (generally a very small percentage). This amount would be deducted from the purchase. Finally, some providers will charge a flat rate on a monthly basis (or different time interval based on the type of business) which covers an unlimited number of customer financing applications.

  • Customers: Do your customers and products qualify for or need financing? As a B2B business, it is likely that the volume and value of shipments would qualify for and buyers would appreciate the opportunity to finance. Customers need to have good credit scores with a history of paying back invoices and and no negative credit events.

  • Implementation: As a business, regardless of size, you want a solution that is easy to implement and maintain for your customers.

About Inxeption

Inxeption is a secure and scalable platform that brings business the ease of consumer e-commerce. From one digital dashboard you can drive sales, manage your supply chain, and optimize costs. For enterprise organizations to small businesses, you can do more and sell more with Inxeption.

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