Consumer financing is becoming more and more popular these days, the reason behind it is easy to understand, as it provides customers with new options to finance their needs. While the company receives full payment, the buyer is getting the product right away and pays the amount over time.
Mostly the Consumer financing process takes a couple of seconds and is applied during check out, when the customers were usually choosing between a credit or debit card, buyers now choose the BNPL option, which gives them a much better and positive shopping experience.
Merchant financing for customers splits the total cost of pricey products and services, allowing clients to pay back loans in lesser amounts on a predetermined timeline. Customers make instalments on a monthly, or weekly basis rather than paying the entire retail amount at once.
The buy Now Pay Later system gives merchants the possibility to get more clients on the market and sell products with risk-free financing. When companies use different financial platforms for their BNPL options, they can be guaranteed to get a profit, as the payment is received immediately and stays with them even if the customer is not able to complete full payment in the future.
You may enhance the likelihood that clients will make a purchase from your company, which will result in more customers visiting your store and more sales for you. By providing consumer financing, you may build a reputation for your company as being trustworthy with money and welcoming to clients from all sectors of life.
Who Can Offer Consumer Financing Options
Small enterprises, major corporations, and third-party finance firms can all provide consumer financing to varying degrees to encourage client loyalty and trust while growing their company to new heights of success. It doesn’t matter what kind of a company you have or if you are offering products or services to your clients. Any company can offer consumer financing to its customers.
Even though most consumer financing options are profitable for the businesses, every company should check different financing platforms and options available on the market to choose the best suitable one for their businesses before they offer Point of Sale financing to their customers. There are two ways to arrange the payment after the BNPL option is chosen: direct-to-merchant and direct-to-consumer.
Consumer Financing for Merchants
If direct-to-merchant financing is chosen by the company, the lenders are fully paying the amount to the merchant. The company has to pay a small fee for the payment and the consumer is covering the amount directly to the lender over time. This process makes it easier for the buyer to purchase expensive items or services with a comfortable plan.
When the business wants to use the direct-to-merchant option for their Consumer financing, they should be able to meet some requirements for that, for instance, certain minimum annual revenue, or may have to prove that in case of fraud or customer disputes they can cover any kind of shortages from their side.
The companies may receive a huge amount of funds from different loans, as buyers are purchasing different expensive goods with the help of Point of Sale financing, the lenders are always trying to get the merchants with the best business records during past years. Direct-to-merchant financing loans are usually high amounts planned to be completed sometimes in a couple of years, so lenders from different financial platforms need to make sure the merchant, using consumer financing, can meet the requirements they have.
This makes the direct-to-merchant option available mostly for bigger companies, which sell more expensive products compared to other businesses, to offer consumer financing to their clients.
Merchant financing for customers
One of the most widely used methods of payment for goods and services is through consumer loans. Many people find it attractive to have the option of financing larger televisions or new cars with more manageable monthly payments. So, what is direct-to-consumer financing, and how is it different from direct-to-merchant financing. During direct-to-consumer or customer financing, the lenders from different financing platforms offer consumer financing for the product or service to the buyer, the customer then repays the money within a predetermined time frame
So, what is the best option for consumer financing for small businesses? customer financing is more dependent on the consumers who choose to use the BNPL option for their purchases. Those companies that are smaller or don’t meet the needs of lenders from different financing platforms, can still offer consumer financing to their customers. During the customer financing option, the consumer is the one who gets the funds, not the company. So, the buyer can pay the full price to the merchant, and pay the amount to the lender over time, however, the customer has to qualify in this case, some financing platforms or lenders require the consumer to be a prime borrower, which means that no negative credit history and credit score of more than 610-640 is essential for the loan to be approved.
On top of the comfortability that direct-to-consumer financing has, it can also become the converter of a browser into an active buyer, so how does it work? Consumer financing can encourage the buyer to make a purchase, simply because of a bad financial situation, the customer may not be able to buy a certain item or service at the moment, however, with a BNPL option available on the website, the potential buyer can become an active returning customer of the company.
Larger sums can be borrowed each loan, and credit score restrictions are lower because funding loans directly to individual customers is less problematic than funding loans on behalf of the consumer directly to the retailer. It’s crucial to be aware that payback periods are frequently shorter, borrowers may only have six years or fewer to pay back the loan.
Choosing Between Consumer Financing Options
Maybe, most companies prefer to have both consumer financing options available on their platforms, however, before choosing, there are many things to consider before you offer consumer financing options to your customers.
Firstly, the company has to make sure they meet the requirements, the lenders and the financing platforms have, to make sure that they are ready to offer POS financing to their clients.
Merchants have to decide how they prefer to receive their funds, directly from the lenders or the consumers. While companies think that direct payment from the lenders is more comfortable, it may also be involving some merchant fees, which can be easily avoided by getting the finances from the buyers.
Depending on different financing platforms and offering BNPL and point of sale financing options to your customers, allows you to raise the prices of your products and services, as you are delivering the same quality product with a much more proficient payment plan for the buyers.
Finally, companies should research to make sure that the financial platform they choose, is the one they need and can deliver what they promised, otherwise, it may arise many problematic issues in the future which will have to be fixed by the company itself.
Why You Should Choose ChargeAfter Network
When we talk about big funds, every business or person should be in total trust with the financial platform they do business with. Whether you are a company, which offers consumer financing, or a customer who uses the buy now pay later option for purchasing goods, you should always check different options available on the market. In both cases, trust is the main factor that makes the decision right. ChargeAfter is a consumer financing network that connects experienced companies and businesses with trustworthy lenders, which makes working with ChargeAfter safe and secure.
By the end of the day, all the applications should be reviewed and confirmed by the lenders, and merchants or customers don’t have a guarantee of approval, however with an increasing amount of the lenders on different financial platforms and more interest in Point of Sale financing and BNPL from both sides during last years, show that the consumer financing has a great future and more customers will be using this comfortable financing platform.
ChargeAfter is a leading multi-lender platform for Buy Now pay later (BNPL) Consumer Financing. It connects businesses with the most reliable lenders, enabling them to offer customers the greatest financing solutions. With the best system of Waterfall Financing, ChargeAfter guarantees BNPL lending to every shopper, by matching the most relevant lender to every client. Using the unique consumer financing technology, ChargeAfter provides all parties, merchants, lenders, and consumers, with the best shopping experience. Phoenix, MUFG, VISA, Bradesco, BBVA, Synchrony, PICO Partners, CITI, Propel Venture Partners, Plug and Play, and other companies worldwide are among the investors of ChargeAfter.