How to use a commercial loan to offer financing to your clients
When you have a business, you should also put yourself in the place of your customers. For a moment, put aside your concerns about cash flow, income statements, invoices. Think for a second: “What do my clients need?”
Many times, your customers may want to buy your product or hire your services, but they don’t have enough money. You should be able to identify if that is the main reason why they are not meeting your sales goals.
Luckily, there is a way to increase your sales without having to lower the price of your products. By offering financing to your customers, you can make the sale and postpone the moment you receive the total amount of the purchase. You can let your customer pay a deposit at the initial time of purchase and then pay what they owe over time. Basically, customer financing allows them to pay over time and leave only a small deposit at the beginning (or leave no deposit if you choose). They usually make monthly payments that may include interest. Customer financing is especially useful for those companies that sell high-priced items (furniture, vehicles, heavy machinery, etc.) or whose services are generally extensive and expensive (remodeling and repair work, for example).
How can you afford the financing of your customers?
Maybe you think customer financing sounds good in theory. But does it make sense to your finances?
You can make it work if you have enough cash flow from the sale of other products or investments you have made. In this way, you can offer customers financing without having to take any risk. That would be the ideal situation, but the truth is that very few small business owners have such large amounts of cash. So, what alternative do you have, if like many other entrepreneurs, you need strong cash flows to keep your business going and grow it, so that allocating it to customer financing is impossible?
You can apply for a commercial loan to get the extra short-term money that you will lack if you allow your clients to pay in monthly amounts instead of making a full initial payment. Remember that you don’t have to use a business loan just for emergencies or to buy equipment, inventory or real estate. You can also use a commercial loan to finance some of your most aggressive growth strategies , such as financing your clients.
In short, financing your customers is a growth strategy with enormous potential for your business.
Advantages of customer financing
- Increase customer loyalty: Offering a more flexible payment plan will create a good image. Customers will appreciate your flexibility, especially if they have not been able to receive the same treatment from your competition. A positive shopping experience will win you long-term or even lifetime customers. In short, it is a proven way to increase the commitment of your customers .
- It helps you make sales that you could not otherwise do: Many times your customers simply cannot pay for your product immediately. If they are forced to choose between making a full payment now or not making the purchase, they will surely opt for the latter. Therefore, financing your customers could make the difference between making a sale and not making it at all. Offering a flexible payment plan can generate additional revenue for your company that you might not have considered.
- It provides additional earnings: Not only can you make additional sales, but you can also earn more money on those sales if you choose to add an interest rate to the monthly payments. For example, a sale of $ 1,000 could translate to a total of $ 1,100 or more over time if you charge interest. But be careful: adding an interest rate carries its own risks. The good image you can create by being flexible with payments could be affected if you charge an extra, especially if your competitors offer financing options with 0% interest.
- Diversify your customer base: By offering different forms of payment, you could amplify your customer base. You will reach customers who previously could not pay you in a single down payment. A wider clientele will open new possibilities. For example, that new group of customers may need an additional item to complement the product they bought you. You may be able to add that new product to your inventory line and earn additional income.
How does the financing of your clients work?
There are different ways in which you can adapt the financing of your customers, but basically you should always take these steps:
- Promote your financing options.
- Encourage your clients to request financing.
- Perform a credit check of your customers (you can do it by creating an account with Experian Connect ).
- Approve the client to obtain financing.
- Apply financing options to customer purchase.
- Deliver the product to the customer or perform the agreed service.
- Receive regular payments from the customer.
- Close the purchase once you have received the full payment.
History of how client financing works
Juan Ocampo is the owner of Flaco’s Custom Food Trucks , a company that manufactures customized food trucks and tailored to the needs of each customer. As you can imagine, buying a food truck can be expensive for these customers, especially when Juan adapts it to their exact needs and specifications.
The problem for Juan was twofold: first, many of his potential clients could not pay for the food truck at once. And second, Juan could not afford not to receive full payment at the time of purchase. Offering a flexible payment plan to its customers without being properly prepared would have negatively affected Juan’s cash flow, making him unable to buy the parts and inventory necessary to continue building more food trucks.
So what did Juan do?
He applied for a commercial loan with Cafortos Financial to finance his clients and offer them flexible payment options. Despite not receiving all the money for each food truck immediately, you have the loan money to continue buying raw materials and continue manufacturing more trucks while waiting to receive payments from your customers. Of the $ 50,000 of the commercial loan he requested, Juan received a 60% return on his investment, which made it worthwhile to apply for a loan. The loan provided him with the money he needed to continue operating his business, serve his clients and help them fulfill his dream of having a food truck. You can read Juan’s full story here .
What steps can you take to offer financing to your customers?
To offer financing options to your clients, you must ensure that you have the cash available to continue operating your business without problem. Most companies need to find a way to overcome the cash deficit that comes from not receiving the purchase payment immediately.
A commercial loan from Cafortos Financial could be the ideal option. With Cafortos, you have great flexibility in the amount you can borrow, and our interest rates are very reasonable. Our requirements are also flexible, and we adapt the terms of the loan to your needs to guarantee a good investment and you will earn more money with little risk.
Even if you have never considered taking a business loan to offer your customers flexible payment options, now is the perfect time to consider this option. The financing of your clients can make these clients more loyal and can even allow you to make sales that you could never otherwise realize.
Count on loyal customers and increase your sales in general: financing your customers can be the solution you’ve been looking for to grow your business.