3 Ways Secondary Financing Can Change Your Business for the Better
Despite the challenges it has brought, the COVID-19 pandemic presents a unique opportunity to grow your business and influence your bottom line. Rather than focusing only on reversing the effects of COVID-19, embrace the opportunities of this new reality. With many Americans facing economic uncertainty, understanding their new financial challenges can help you develop strategies to better serve them and boost your income.
When money is scarce and customers don’t want to deplete their savings, credit is a great alternative. Being able to pay for big-ticket items (e.g. appliances, furniture, mattresses) over time can ease their fear of running out of cash for emergencies.
But what happens when customers are not eligible for credit through traditional methods? Alternatives like lease-purchase financing, otherwise known as “secondary” financing, are an accessible and safe way for credit-challenged customers to get what they need, and for you to increase sales.
People need products and services regardless of their credit score or history. Think of all those customers you’ve lost because they were not approved for traditional financing options, such as younger customers with little to no credit history, people who’ve filed for bankruptcy, or who defaulted on a few payments due to job loss.
According to a survey from Compare Cards, one in four Americans saw their credit card limit reduced and or closed altogether within the last month. Younger generations are among the most affected by these changes. And since banks are not obligated to inform cardholders that their credit line has been cut, consumers are taken by surprise when they find they cannot purchase needed items.[i] When a customer with bad or no credit history needs a new mattress, sofa, or refrigerator, a lease-to-own agreement allows him to get it. Sometimes, the amount approved can help them afford more than the merchandise they initially needed, increasing their invoice amount and your sales.
Around 30 to 35% of Americans are credit-challenged. You can’t leave such a significant portion of the population unattended and underserved! They deserve access to financing options that could help them get the products and services they need.
With a lease-purchase agreement, the financial institution pays you for the merchandise and rents, or “leases,” it to the customer. You win new clients while increasing your revenue with practically zero risks. With more cash, you’ll be able to work on long-lasting efforts like reinvesting in new merchandise, incentivizing returning customers, or acquiring new technology. Think strategically and focus on activities that can give you a competitive advantage and keep your business strong long after the COVID-19 crisis.
After experiencing how easy the lease-to-own process can be, customers will come back whenever they need something, driving a steady flow of sales from repeat customers.
This customer loyalty can translate to new customers as well. When customers can trust you and the financial institution who helped them when they needed it, they’re more likely to spread the word about you. They’ll then share their great experience with those around them, bringing new customers to your door.
Make sure you reward customers for their loyalty! A rewards program is a long-term strategy that requires constant attention and adjustments. Having a partner that can take care of the financing solutions could make it easier. You can focus on providing your customers with the best service while the lease-purchase company takes care of their financial needs. It’s a win-win situation.
Credit issues can affect almost anybody and can present an obstacle in getting customers what they need. So, offer financing alternatives to satisfy your customers, increase your sales, and bring long-term benefits to your business.
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