SMBs And The Benefits Of Customer Financing

Small to mid-sized businesses have the same challenges as their larger brethren — growing sales, gaining repeat business and keeping track of who buys what, when and why so that the first two challenges can be continually addressed.

Customer financing can be a boon to all of the above, especially in promotional activities where low or even zero percent interest rates can lure browsers to convert into paying customers.

In an interview with PYMNTS, Robb Lejuwaan, general manager at Paypro Finance, an online consumer financing company focused on SMBs, said that financing, thus far, has been a relatively untapped market but one that is seeing interest and what he called “land grabs” in the space from smaller firms. Credit unions and a few banks are becoming increasingly aware of the potential in this type of financing.

Certainly, the pie is a large one: Paypro has cited statistics that consumer finance spending in the United States alone tops $391 billion annually.

One key toward increased sales is the ability through Paypro, said Lejuwaan, to offer customized programs, tailored both to industries and consumers. And a competitive advantage, he added, comes as the firm offers a paperless process that can help speed time to a final financing offer.

As has been seen in other avenues of lending, online application processes are starting to replace the age-old, paper-based processes of submitting information.

Lejuwaan told PYMNTS that the traditional consumer financing model has been one where companies offer a series of financing programs geared toward different customers — tied in part to their credit ratings, from outstanding credit to, basically, no credit. That changes a bit with online platforms, said the executive, with the “ability to show the credit offer to the consumer before the application is actually completed” so that they can see the terms (and whether they find them acceptable) ahead of completion.

Once the details are complete and the customer signs off electronically, he or she takes possession of what has been purchased, while the merchant is funded directly. The process can be done through mobile devices, said Lejuwaan.

Speaking to broader trends within customer finance, Lejuwaan said that some businesses are utilizing this as a tool to leverage sales — such as, say, powersports companies or auto repair (areas where Paypro has been seeing interest in its own financing platform and, added Lejuwaan, medical companies are to be a focus for Paypro going forward) — toward bigger ticket items.

Key to boosting sales, he said, is the ability to “turn promotional activity off and on” through Paypro, where sales can be tailored toward specific dates, items and also certain rates. He noted that, for example, merchants can offer zero percent financing across certain dates, for 12 months, for example, or for terms as few as six months or as long as 24 months.

One added benefit, according to Lejuwaan, is that customer financing allows firms to use data analytics — as he put it, “what is the credit score of the client and where they live” and where their interests lie (in terms of what they are buying).