Customer financing allows small business customers to pay for a purchase over time rather than make full payment upfront. Businesses can offer financing to customers by creating an in-house processor using a third-party provider to do the work for them.
The best financing contractors is used in accordance with securities law to allow for individually negotiated agreements involving commodities, securities, currencies, or other interests of an economic or financial nature.
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There are two main ways to offer customer financing to customers:
1. In-house customer financing
If you’re considering offering in-house customer financing, be prepared to spend time managing the process and training employees. An important thing you’ll need to figure out is how to verify that a customer is creditworthy. You want to be sure that you’re offering to finance people who can repay you.
Additional steps could include:
1. Determining what terms you’ll offer and how a customer will repay you
2. Creating a process for tracking payments and collecting late payments
3. Making new journal entries to reflect the accounts receivable
2. Third-party customer financing
Third-party customer financing outsources the work of setting up and monitoring the program to an outside provider. Instead of running a credit check, offering financing plans, and tracking monthly payments, you offer your customers the choice to pay with a financing option.
If a customer is approved by a third-party payment provider, the business will often receive the payment upfront. Like they would with a credit card, your customer will make payments to the provider rather than to you.