How Does Consumer Financing Work?

Offering consumer financing can help boost your initial sales and customer retention, but opening a program can also be daunting to people who have never offered credit before. In truth, credit financing is quite easy to set up and run because there are a variety of lending partners you can work with to streamline the program. They specialize in custom programs for individual businesses, and they can work with companies in practically any industry, although individual lenders do tend to have a niche. Financing options often include staple features that have a proven track record with customers, like six months same as cash. The question is whether you want to work with a primary program, a sub-prime lender, or someone who can do both.

Primary Lending Programs

These are typically thought of as “first look” programs because they offer very competitive rates for customers whose credit makes them a good risk. These programs are typically feature-rich and attractive, but customers who have had recent financial issues might not qualify. These programs limit the pool of prospective customers, but they do tend to appeal to the people who can afford to spend more money with you. It helps if you have an option for customers that a primary program won’t serve, though.

Sub-Prime Financing

Also called second-look lending, these consumer financing programs specialize in covering as many people as possible. Since they do offer options to customers not served by primary programs, they are often more expensive for the borrower. For the business offering consumer credit, the difference is in the options available as incentives. Shopping around can still find you some great programs with a lot to entice new clients, though.

Choosing Your Program

When you enter into an established program, you get the benefit of an out-of-the-box solution designed to simply work, with minimal setup or ongoing maintenance on your part. It’s a good idea to offer both a primary and sub-prime option, but depending on your industry and finances, the real question might be whether to find one company that does both or two focused lenders who each give you a great service. Coming to terms with those options and picking the right one for your company can make a big difference in your customers’ buy-in, and buy-in is key to making a new consumer financing program work because you aren’t going to get the benefits of increased sales if people aren’t using the resource meant to increase your sales.


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