Affordability is genuine barrier to closing many sales.
Financing constitutes using payment options and terms as an effective way to both gain agreement for a sale and keep the sales transaction affordable for the term of the agreement. Many companies need goods and services to operate profitably, but cannot or will not pay cash in full at the close of the transaction.
Examples of common finance options include a lease, a payment plan, a revolving line of credit/internal charge card, a finance contract or a mortgage.
Many businesses use third party finance companies to offer these finance options to their customers. This involves a company selling off transactions as terms for the customer as part of a finance portfolio to a third party firm in exchange for your company receiving payment in full and letting the finance company then administrate and service the credit part of this transaction.
Common ways finance companies make their money include using either a lease factor or an interest rate based on the term of the contract. In offering terms that are ‘X days same as cash,” the finance company usually is asking the vendor to take a percentage discount from what the customer paid, also known as the face value of the sale.
If you have ever had to handle debts and financing as part of your business, you can see where selling off the transaction to avoid the hassle of collections activity and concentrate more on sales and servicing your customers could be a good thing. Since these are generally credit-based transactions, they may also have credit requirements, both corporate and individual, of your customer in order to purchase this transaction from you.
Depending on how tight is the credit scoring your finance company uses, this could also lose you sales as well.
QUESTIONS TO ASK:
- Do our customers seek finance options? Would they start this process themselves or would they want us to offer this as a service of our organization?
- Would we offer simple options such as accepting purchase orders or NET: X day’s payments.
- Do we want to offer this as part of our internal operational structure; does it make sense to use an outside company to offer this service or some combination of both?
- Are their laws and regulations with which we would need to comply in order to offer such financing?
Finding a way to help your clients pay for your products, services and ideas should be added to your business and marketing plans... Do it now.
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