How to Offer Finance Options to Customers Beyond Traditional Financing

Chasing down clients for late payments is an exhausting endeavor that can ultimately result in cutting ties. So when clients can’t pay their invoices in full with one payment you can offer financing options to them.  

These options might include traditional financing (bank loans, credit lines, etc.), consumer financing, and for more flexibility, Buy Now, Pay Later (BNPL).

BNPL is a newer financing option that is gaining traction for online retailers — and now B2B merchants.  BNPL companies allow users to get the full product or service upfront, and afterward, make fixed monthly payments in a digital portal. B2B professionals turn to this option when clients can’t afford the full bill amount upfront or when clients are juggling other large expenses.

But there is still one major flaw to several of these financing companies: Many applications get rejected.  

According to a Bankrate study,  

“21 percent of U.S. consumers have had an application for credit rejected in the middle of the coronavirus pandemic because a credit card company, lender or landlord deemed their credit score too low.” 

Even customers with decent financial standing, such as good credit or low debt-to-income ratios, can face denials, including BNPL. 

These growing financing options are on the market to fill in the gaps where traditional financing and consumer financing companies fall short.  

Challenges with Traditional Financing  

Traditional financing, typically from banks, offers low-interest options to fulfill both personal and business needs. It’s the go-to for lending, but borrowers have to sell the idea that their success depends on those funds. 

This type of financing usually includes: 

  • Term loans – Term loans are taken out for a specific amount, typically with specific payment schedules, low-interest rates, and low monthly payments. 
  • Lines of credit – Similar to credit cards, credit lines offer a pool of funds of a specific amount from a bank. 
  • Cash advances – Cash advances offer immediate funds upfront with quick approvals. But recipients have to prove to lenders that the advances will ensure their business success. 

Downsides of Traditional Financing 

Traditional financing is typically only for those in good financial standing with good credit, consistent income, collateral, and little to no negative remarks.  

It’s a two-way risk — lenders take a gamble on borrowers’ successes, and borrowers might have to make hard business decisions to make up the amount owed. 

Also:

  1. Payment plan flexibility is contingent on your financial standing. 
  2. Banks offer few digital tools or integrations — usually just a customer service phone number. 
  3. Financial requirements (credit score, assets, income, etc.) are more rigid. 
  4. Approval processes are lengthy, and with numerous hurdles. 

Instead of dealing with lending restrictions, you can explore financing options that consumers can be approved for — and ultimately improve your cash flow. 

Although some clients can breeze through these applications and approvals, some others might need more forgiving and flexible financing. 

Current State of Consumer Financing 

More options for consumer financing appear on the market by the day, including Buy Now Pay Later (BNPL) and branded credit cards.

Of course, the biggest downside to consumer financing is the same as traditional financing — consumers have to face credit checks, applications, or approvals. 

This model still puts pressure on consumers to stay in good financial standing, and that pressure often falls back on merchants. Merchants who don’t adapt could be missing out on cash flow and client retention.  

In a survey conducted by Jobber,  

“66% of respondents indicated they would be more likely to use monthly financing in situations that required emergency work, such as fixing a burst pipe.” 

So even if a consumer needs an emergency service from your business, they could have that fear of financing rejection and skip out on the services they need.  

Buy Now, Pay Later (BNPL) 

BNPL companies, including Affirm, Klarna, and Afterpay, have become popular for online retailers. BNPL allows these retailers to increase shopping cart and average order values, and it can also convert undecided shoppers.  

And now BNPL can be used for both B2C and B2B merchants. To make BNPL successful for your business, however, you need to have a payment portal, the ability to receive funds digitally, and the tools to split payments.

With the right BNPL provider to cover all these bases, it’s possible to help your clients out while still getting paid for your work.  

Other Consumer Financing Options 

Consumer financing options take the upper hand in payment flexibility compared to traditional financing. There are countless consumer financing options out there, and they have their unique audiences, services, and products. 

CareCredit  

As a leader in the medical financing market, CareCredit offers a credit card for those who have difficulty affording medical procedures that their insurance plans can’t cover.  

However: 

  • Consumers get hit with a 26.99% APR if they miss a payment. 
  • Even if consumers are financially responsible, CareCredit doesn’t offer perks like cashback rewards. 
  • The card can’t be used with every healthcare provider and is only applicable for medical procedures. 

United Consumer Financial Services (UCFS)  

UCFS covers every area of professional service you can think of for consumer payment plans. The payment plans they offer are 12-36 months, which are longer than other competing financing companies. 

Let’s look at an option that offers almost everything for consumers and merchants to continue services, without compromising cash flow.   

A Consumer Alternative to Traditional Financing  

QuickFee Pay in 4 puts the power in your hands to effectively collect payments while maintaining consistent cash flow. Clients just need a credit card to split their bill into four monthly payments. 

Here’s how it works: 

  1. Your client sets up their payment plan. 
  1. Clients make interest-free monthly payments. 
  1. You receive the funds within the next 1-3 business days. 

No applications ✓ No credit checks ✓ Quick approvals ✓ 

Clients can keep receiving the services they need and want with payment flexibility. In an all-in-one digital offering, you can complement your current financing system. 

Finding solutions that streamline invoicing for both merchants and clients can be difficult, especially with financial limitations. But compromises aren’t necessary if consumers with financial limitations need services — you just have to find the right solution for your business.  

Expand your financing options and build better client relationships. Contact our team for a demo! 

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