In-House Lending: HOW RETAILERS CAN PROVIDE CUSTOMER FINANCING AND BOOST ROI

Advancements in technology and business operations have opened several opportunities for retail businesses that never existed. Lending is facing significant transformation. Going to the bank and applying for financing is no longer the norm. Lending is becoming more flexible, and finance in general is becoming more democratic. The next big thing is in-house finance. 

Nowadays, seamless transactions at the point of sale can be made in record time without compromising the quality of service delivery. Customers can apply for credit in-store rather than going outside to seek financing or using a credit card with potentially high-interest rates. This reduces the chance of a broken sales funnel, boosting the chances of a transaction. 

Customer financing and in-house financing are different terms used to describe the same concept – providing clients with a way to pay for your goods or services in several instalments with interests that make it worthwhile for you

In this article, we have put together a list of ideas that explain what is in-house financing, how retailers can offer in-house financing options to customers,  and why you should consider using a reliable software solution to handle all your customer financing needs, irrespective of the situation. 

Table of Contents

What Does In-House Financing Mean?

Why should your business offer in-house financing to customers?

Top 5 Businesses Set to Benefit from In-House Customer Financing in the Next 5 Years

How to In-House Finance with Ready-Made Lending Software

Conclusion

What Does In-House Financing Mean? 

In-house financing means that the customer obtains a loan from the vendor rather than obtaining bank financing or utilizing a high-interest credit card to buy a  high-ticket item such as necessary equipment for business or significant purchases like a car or furniture.

Car dealerships are well-known for offering in-house financing. Customers may complete an in-house financing application for a new or used vehicle on-site at the dealership and get approved the same day.

Dental offices, home goods and electronics stores, equipment retailers, and even home builders may offer in-house financing programs.

In-house financing is immensely appealing to a growing number of smart retailers who have come to see technology-assisted lending as easy and profitable in contrast with expensive and complicated point-of-sale outsourcers. 

There are key differences between bank financing and in-house financing for client

 

Simpler application process

Because the financing and purchasing processes are handled by the seller directly, in-house financing typically has an easier application process. While it may take days or weeks for a bank loan to be authorized, organizations with in-house finance offer faster approval and quicker sales cycles that improve customer experience.

 

 Easier  Loan requirements

The company directly works with the client to negotiate the loan terms and creates clear standards for borrowers. 

Sellers offering in-house financing may approve customers with subprime credit scores. This is in contrast to working with third-party financial institutions that may have higher  requirements for borrowers to meet

However, the seller will still look at factors such as client income, residency, and the down payment to judge whether the client could repay the loan. In exchange for this flexibility, the seller may charge a higher interest rate on the loan as well as require a larger down payment

 

Flexibility and Convenience

In-house financing allows the buyer to negotiate and manage the terms of the financing agreement with the retailer at the time of purchase with more flexibility, including interest rates, down payment amounts, and monthly payments, This type of financing often offers a quicker and more convenient transaction than applying for a third-party bank loan.

Businesses that provide in-house financing may give discounts as part of the financing agreement, which may result in lower pricing for the product or service. You might even be able to negotiate for the greatest price.

 

Top 5 Businesses To Advantage  from In-House Customer Financing Most 

In-house customer financing is a great way to improve your customer’s buying experience, and it can benefit your business in a number of ways. Here are five businesses that are set to benefit from in-house customer financing in the next five years:

  1. Manufacturing companies

In-house financing can help unlock the profitability of your manufacturing business.

How? By providing a financing option for your customers, you make it easier for them to buy your products and services. In-house financing allows them to spread the cost of their purchase over time, making it more affordable and less of a burden.

In-house financing also helps your business by:

– Reducing the amount of time it takes to get paid for products or services sold

– Improving cash flow and working capital needs

– Allowing you to offer special financing terms not available through banks or other lenders

  1. Jewelry stores

One of the businesses set to benefit from in-house customer financing in the next five years is jewelry stores.

When it comes to financing, jewelry stores have a unique opportunity: They can offer customers the chance to purchase fine jewelry over time, with no interest charges. This not only helps customers get the pieces they want, but it also builds loyalty and encourages return visits.

In addition, in-house financing can help jewelry stores expand their reach to new markets. By extending credit to new customers, stores can open up their doors to a whole new group of people who may not have been able to afford their products before.

  1. Auto dealerships

For car dealerships, in-house customer financing can help you to buy vehicles for your inventory at an affordable rate and provide customers with a means of purchasing new or used cars without having to pay in full straight away. This way, you can increase your sales volume by offering great deals on vehicles without taking any risks.

  1. Medical equipment 

Medical equipment is needed more and more nowadays, and with this comes the challenge of how to finance it. As a business, you might not want to take on the financial burden yourself, but instead be able to provide customers with an attractive financing option that allows them to spread the cost over a longer period of time. 

  1. Home improvement stores

You’ve probably seen the furniture stores that offer in-house customer financing. Well, it’s no coincidence that this is a growing trend. Furniture is a high-price item, and more and more people are finding themselves unable to pay for it in one lump sum.

That’s where in-house customer financing comes in. It allows customers to break the cost of the furniture down into manageable monthly payments, without having to go through a bank or other lender. And because the customer is dealing with the furniture store directly, there’s no need for a credit check.

This is a win-win for both the customer and the store. The customer gets to buy what they want without having to jump through hoops, and the store gets to sell more furniture (and sometimes at a higher price). It’s no wonder this trend is catching on among furniture dealers.

Why should your business offer in-house financing to customers? 

A lot has been discussed about retail financing and how you can offer in-house financing to your customers. But what’s in it for you? Here are some reasons why you should offer in-house financing to your clients.

 

Boost Overall ROI

If you want to drivemore sales, increase your conversions, and enjoy improved marketing ROI, you have to consider offering customer financing options. 

With Compassway’s in-house lending solution, you can boost the overall ROI of your retail business in total confidence. 

Our product features will increase your average order value by 58%, increase the purchase frequency by 20% in one month, and increase your sales conversion rate by 44%.

Take control of your sales conversion rate, and average order value, and confidently increase your average purchase frequency in one month 20%. You also get 2-6% of all transaction charges and interests! 

 

Win repeat business 

The goal of every business is to close more deals, make profits, and stay in business. Customers are more likely to return to you for another business when you offer an easy way out for them through a flexible payment process. 

Integrating additional payment options makes the purchasing experience seamless and increases your chances of landing repeat businesses with existing customers.  

 

Earn customer loyalty

When you offer an easy payment option for customers and deliver quality service, you increase your chance of earning their loyalty. This is the best way to get them to buy from you again in the future. 

Not only does this mean more sales for your business, but it also means your customers are satisfied and happy with your business and may likely act as references or word-of-mouth referrals advertising your business to their friends and family free of charge! 

 

Improve customer experience 

Retail financing options reduce barriers to payment and empower your customers to buy more services and products with ease. Customer satisfaction is a very important aspect of running a successful business. 

When customers can pay instalments for goods or services purchased, their satisfaction with your quality service delivery increases. Interestingly,  having multiple customer financing options improves the overall customer experience and creates room for repeat businesses in the future. 

The only question that remains is how to follow the trends and what in-house financing software is good enough to improve your bottom line tomorrow.

Compassway SaaS lending software is a reliable financing solution which provides in-house financing such as point-of-sale lending and the option to buy now and pay later. 

 

How to In-House Finance with Ready-Made Lending Software 

With Compassway, you can automate the entire stages of the in-house lending process – from managing loan applications and repayments to tracking overall business performance with regular reports and analytics. 

Our all-in-one system provides everything your business needs to offer in-house lending to clients on your own terms. Here’s what you’ll get:

Fully digital processing

The digital lending platform allows you to quickly issue a loan with zero paperwork. Faster loan approvals and releases will reduce the “time to yes” from weeks to minutes -.

CompassWay is an all-in-one lending platform that automates the loan origination process from application to funding, delivering a best-in-class experience for your clients and team – for any loan product. With advanced algorithms and analytics, vendors can quickly score clients and automatically make credit decisions.ct, anywhere in the globe. 

Real-time checks: ID verification, Know Your Customer (KYC), Anti-money laundering (AML), credit history 

Digital lending software is equipped to synchronize data from KYC registries, credit bureaus, banks, etc. to ensure that all uploaded data and documents are authenticated. Decision rules and underwriting algorithms are then used to determine whether the loan application passes the checks and balances of risk.  

Increased automation and strong back-end technology enable staff to be redeployed from reviewing loan applications to work that adds more value.

Real-time risk profiling 

Risk management is a most important aspect of a digital lending platform. The capacity to mitigate credit risk will prevent costly losses and preserve credit availability for deserving borrowers who will become or remain active participants in the economy.

The digital lending solution should give you real-time insights into borrowers’ creditworthiness based on their credit scores. 

It‘s also crucial to have a customisable scorecard based on recent cash flow information, total debt level, repayment history and other factors. 

Both internal and external data sources are used in a credit decision model and have an impact on the quality of credit decisions. The use of objective financial information and other factors proved to correlate with risk allows for increased consistency across each company’s lending underwriting process. The use of risk-based pricing has allowed lenders to better serve consumers across the risk spectrum. Under this system, costs are lowered for the majority of consumers who are deemed low-risk, while credit opportunities are expanded for higher-risk consumers. Risk-based pricing also creates a fairer marketplace.

 The proprietary AI-driven technology of deep neural networks and machine learning allows making decisions about loans within 30 seconds. CompassWay’s AI model analyses over 400 variables collected during the application process and sourced from third parties – ranging from credit bureaus to social networks.

Automate Marketing and Client Loyalty Program

 A strong digital lending platform should provide you with critical analytics to help you make informed decisions. For example, the platform should provide you with information about client acquisition channels, time applying for loans or cross-device tracking. These insights assist you in identifying and correcting issues in your onboarding process in order to attract more qualified borrowers to your financial institution.

The digital lending platform should help you with getting return customers .. CompassWay’s digital lending platform displays personalized loan recommendations to existing borrowers to expand the possibilities of making them repeat customers. 

Notifications, SMS, email, or personalized nudges — provide your marketing teams with the tools they need to create targeted campaigns and outreach that engage customers and members, resulting in long-term loyalty and stickiness.

The digital lending technology also makes perfectly clear loan applications for return customers by automatically pre-filling forms with existing client information. The result is improved customer experience and a higher retention rate. Orchestrate your digital sales funnels to guarantee the relevant questions, steps, and experiences are presented to your customers at every digital touchpoint

You can also keep tabs on your customers via the borrower portal and check the buy now, pay later status of each client through a dedicated admin dashboard. What’s more? Our buy now, pay later option can be used as a widget on your website or as an online point-of-sale system that works by just scanning a QR Code that is unique to your business. 

 

Conclusion

For retail businesses to thrive, there has to be a way to bridge the divide between closing a sale and losing a sale. Consumer lending is a reliable financing solution with lots of benefits for your retail business. 

Whether you’re just starting as a retailer or want to take your existing business to the next level, offering in-house financing to customers is the best way to land repeat business, boost sales, and increase your overall ROI. 

Compassway is a reliable lending software that provides everything with your need to offer in-house financing to all your clients. 

Interested in CompassWay’s ready-made solution? Contact our team to book a demo 

Authors

Valentina Zhukovska CompassWay

Financial sector professional, combining the knowledge of large-scale bank operations and cutting-edge fintech technology.  Main professional  areas are the transformation of the traditional banking operations into the digital bank and extending this access to banking services to unbanked and underserved clients.

Anna Breus CompassWay

Proficient software QA Engineer ,with a creative approach to verify and validate development fintech products that bring real value for Company ‘s  clients