How to Offer Financing to Your Customers

Published by Martha Pierson at May 12, 2021, Last Updated at July 4, 2022

What do you do with customers that can’t pay for your product or service? Throw them out of your store? A better option is to offer them customer financing. Recent studies show that businesses that offer financing to customers sell 20% to 30% more than businesses that don’t, and the average order size increases by 15%.

What is Customer Financing?

Salesperson requesting consumer financing at checkout.

Customer financing gives customers who don’t have enough cash the chance to enroll in a payment plan to purchase a product or a service. Without paying the entire amount upfront, it allows customers to walk out of the store with the item and pay for it over time in installments.

Most of the time, customers are charged interest. However, they may avoid paying interest if the financing company offers a promotional period and payments are made within that timeframe.

How to Offer Customer Financing

Salesperson helping customer apply for POS financing at store.

There are two main ways to offer funding. The first method is to provide in-house customer financing where the merchant also becomes a lender. The second method is to use third-party customer financing and partner with a POS financing company. Let’s explore each option.

Providing In-House Customer Financing

Merchants can play the role of the lender by providing in-house financing. Putting on two caps has its advantages and disadvantages and comes with multiple responsibilities.

The Benefits of Offering Financing to Customers

Providing in-house customer financing gives merchants the ability to move the conversation away from budget constraints. The salesperson can instead focus on the benefits of the product or the service.

Sell More & Sell More Efficiently

A monthly payment plan is a reasonable way for consumers to budget for the thing they want today without waiting until tomorrow.

Less Price Negotiation

Merchants who offer consumer financing can talk to their customers about monthly or bi-weekly payment plans instead of haggling and settling for less.

Be More Competitive

If your competitors don’t offer consumer financing, but you do, that automatically makes you the better option for many customers.

Attract More Customers

Likewise, offering consumer financing will help you attract more customers, especially those who may not be able to afford your product or service today. Offering a monthly payment plan allows them to be able to make a purchase without having to wait.

The Disadvantages Of Customer Financing

When a merchant decides to provide in-house consumer financing, they step into a minefield of legal and financial risks. Here is what to watch out for.

Legal Risks

In-house customer financing for small businesses comes with legal risks. Everything from your ad copy to your credit screening process can put you on the wrong side of the law. Merchants must be careful to follow both state and federal usury and debt collection laws. There are books of legislation you will need to follow, and many companies do not have the workforce to do it right.

If you fail to abide by the state and federal usury and debt collection laws, you will be at risk of paying fines or other penalties.


When merchants provide in-house financing, the business has to pay the consequences if a customer defaults on their loan. This will negatively affect your business’s finances and cash flow.

Also, you cannot take any action without referring to federal and state laws. Each state has its own rules and regulations when it comes to this matter. 

Before offering in-house financing, do the necessary calculations and research to determine how many defaults your business can handle without harming your cash flow.


Overhead costs play a significant factor in determining the price of your products and services to make a profit. Overhead costs are all the indirect expenses required to keep your business running, such as rent, supplies, and utilities. When you become a lender, your overhead costs increase.

Using Third-Party Customer Financing

A POS financing company.

Offering third-party customer financing means that you don’t have to be the actual lender. You partner with another company that takes care of it.


Some consider partnering up with a customer financing provider to be a better option for small businesses. Here are some of the top reasons.

Less Stress, More Time

The financing company is responsible for:

The third-party financing company takes care of everything, allowing you to stay focused on your business.

Legal Risk Management

Merchants offering third-party financing don’t have to focus as much on the legal aspects of consumer financing. It is the responsibility of the financing company to abide by the rules and regulations. That said, you should still make sure your lending partner is reputable.

Upfront Payments

When offering third-party customer financing, the merchant doesn’t have to worry about hurting the business’s cash flow. When a customer is connected with a third-party provider, merchants receive the total payment upfront within a couple of days. You don’t have to worry about the buyer making late payments. It is the responsibility of the financing company to collect fees and deal with defaults.


Going with third-party financing also has its downsides.

Long Term Contract

When searching for third-party financing companies, you may encounter some companies that only offer long-term contracts. Moreover, if you decide to end your partnership before the end of the agreement, you may be penalized. That’s why, before partnering with a third-party financing company, make sure to do all your research regarding the company and its terms and conditions.

Extra Cost

Not only do third-party financing companies charge interest to the customer, but they also may charge a service fee to the merchants. Even though it makes sense for the financing company to ask for a price for their services, you might want to consider if your business is capable of paying an additional fee.

However, in some cases, merchants may earn commissions when working with third-party financing companies.

Potential To Hurt Your Brand

If one of your customers has a bad experience with a third-party financing company, they may end up blaming you and not coming back to your store. If this is the case, instead of gaining new customers, you will end up losing recurrent customers. Even though it is not your fault, consumers may blame you for the financing company’s mistake.

If this happens enough times, you may start seeing bad reviews pile up on Yelp. If your rating goes down, you may end up losing customers.

How to Choose a Customer Financing Partner

A company choosing a financial partner.

Depending on the industry you work in, you may want to partner with a company specializing in lending specifically to your niche.

Before partnering with a customer financing company, no matter your industry, make sure they offer the following:

  • Soft credit pulls
  • An extensive network of lenders
  • Low cost
  • Fast approval
  • Merchant management dashboard
  • Advanced reporting

Here are some of the most important questions to ask before partnering with a financing company.

How Much Do You Charge Me?

Generally, most companies charge 2.9% and $0.3 per transaction. However, financing programs may charge merchants anywhere from 2% to 6% plus a fixed $0.20 to $0.30 per transaction.

You may also find customer financing providers that charge a monthly fee instead of a transaction fee. Keep in mind that you may also find programs that don’t charge merchants any additional fees.

How Easy is It to Use The Customer Financing Platform?

Consider that your salesperson will need to make the loan request during checkout. Every second it takes is another chance for the customer to back out. That’s why it’s essential to find a platform with a  simple user interface.

The loan request shouldn’t take more than a few minutes, and the customer should have their answer even faster.

Good platforms also include analytics that help you better understand your customers, which can help you optimize your advertising efforts.

How Wide is Your Lending Network?

Some lenders only work with specific types of borrowers. For instance, traditional lenders may not offer funding to consumers with bad credit. Working with a wider network of lenders may increase the chances of loan approval.

How Can You Help Me Find More Customers?

Companies like Finturf do more than just provide a financing request. We can bring new customers to your door. One way we do this is through our mobile app.

When a customer uses the Finturf app, they see a list of merchants in their area that offer financing. This drives more sales to the stores that use Finturf.


Consumer financing is a potent tool that gives customers purchasing power which can lead to business growth. Offering consumers long-term payment plans also helps businesses to stay competitive, improve customer satisfaction, and, most importantly, turn browsers into buyers.

Martha Pierson

Editor-in-ChiefMartha is Editor-in-Chief at Her career began in 2003 when she started as an investment banking analyst. Martha continued her career path as a financial advisor for investments. She has a passion for writing and is mainly focused on covering financial and business management topics.

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