Customer Financing for Small Business: Why it’s Important for Your Dealership
By: Web Finance Direct
If you’re the owner of a dealership, large or small, offering financing to customers is a great way to attract more buyers. For most consumers, purchasing a new or used vehicle, boat, or RV is a major financial commitment. Customer financing for small businesses not only gives consumers the flexibility they need but also signals that a dealership is more established. Customers receive loans from lenders, such as banks and credit unions, and pay them back over time. According to a report from Experian, the overall auto loan balance in the U.S. grew by 5.8% from 2020 to 2021 to a staggering $1.43 trillion.
Despite challenges presented by COVID-19, the supply chain, and even inflation, consumers continued to seek out financing options for their purchases. Because of this, it is important to consider providing financing to your customers. With a number of pros, including higher sale numbers and average purchase values, offering financing to customers is a strategy that is only becoming more widespread.
How to Offer Financing to Your Customers
The first step in customer financing for small businesses is determining the how or why. In certain cases, it may not make sense for your small business to provide financing to customers if the equity risks are too high or there is concern that your customers will not pay back their loans. It is important to remember, however, that you don’t have to provide financing to any customer who walks through the doors.
Establish a Credit Check System
As a small business that offers customer financing, it is important to make sure you verify an applicant’s credit score and history, especially if you want to limit or avoid borrowers with credit scores under 650. While customer financing for small businesses can include options for those with a less desirable history, the risks are naturally higher. It is crucial when determining how you will offer financing to your customers to consider credit scores and how they may affect your loan portfolio. On top of this, it is also important to verify potential borrowers’ sources of income and even titles to make sure there are no outstanding liens or claims against the vehicle they are purchasing.
Consider Partnering with an F&I services company
For small business dealerships looking to grow their sales, working with a full F&I services company could be the solution. This form of customer financing for small businesses involves a partnership between the services company, a lender, and a dealership, which assists with the loan application process. The F&I services company partners with banks and credit unions, which directly gives customers multiple loan offers to choose from when sitting down to finalize their purchase. This financing model can also help dealerships remain competitive in today’s cutthroat market.
This is where Web Finance Direct comes into play. By joining our network of dealers, you would be able to provide a more seamless experience to your customers thanks to our full F&I services and diverse roster of lenders. With benefits like fast response times, automated loan document preparation, and on-the-spot decisions, Web Finance Direct can help your dealership provide the best financing to customers.
Market Your Services
Once you’ve done the hard work, it is also important to advertise how your business can offer financing to customers. People are always on the lookout for better and easier ways to make purchases, so including your financing services on your website and social media can help attract customers from your competitors. Word of mouth still goes a long way, even in today’s digital age, so make sure your message gets out there. It may also be beneficial to have your sales team mention financing options before finalizing deals with customers, as financial flexibility could be an additional selling point.
Can I offer financing to my customers?
Customer financing for small businesses is as important as ever in today’s economic climate. If you determine that offering financing to customers is right for your dealership, you can proceed in several ways, including partnering with an F&I services company.
What are some financing options for small businesses?
Depending on the experience you want to provide, working with an F&I services company may be the best form of customer financing for your small business dealership. By assisting in the loan process on behalf of a network of lenders, you’ll give your customers the flexibility they need.
How do you give credit to customers?
Once you’ve established credit score checks and an income verification process, whether internally or through your lender network, your small business can provide financing to customers. By determining which borrowers are best for your business, you’ll create a more seamless process that can help grow your sales. By working with an F&I services company, they can help with this process.