70% of equipment in the U.S. is purchased through financing. It’s a billion-dollar industry. But there are a lot of misconceptions about how equipment financing works and how to implement it in your business. How many of these myths do you believe?
Myth #1: Financing is for customers with great credit.
If you’re only offering a traditional credit-based financing plan, you could end up turning away up to 40% of your prospects. 68% of small-to-mid-sized businesses have a credit score less than 680. New businesses with no credit also struggle to obtain traditional financing.
Make it easy for ALL your customers to afford the equipment they need. Adopt a broad suite of financing options to accommodate customer needs and preferences, approve more customers, and close more deals.
Myth #2: The customer should start the financing conversation.
Business buyers—especially small business buyers—are extremely price conscious. The first thing buyers want to know is: “Can I afford it?”
Make it easy for customers to find the information they’re looking for. Start the conversation by integrating payment options into your site (or storefront) early and often. Communicate with customers about all their financing options and work with them to find the right one. Understand your financing options and encourage customers to find the one that will work best for them.
Myth #3: Financing is only used for big purchases.
Most financing, credit, and leasing partners manually underwrite, consider, and approve applications. With that long, arduous process, it isn’t worth their time to work with most small business applicants.
But new algorithms enable financing partners to automatically process and approve applications. Since they aren’t spending man-hours processing applications, they can approve your customers for financing at even lower amounts.
Provide financing options that will approve customers at every price point and credit score. Show customers you can help them solve their buying problems.
Myth #4: Financing is a headache.
83% of purchasers say financing options—especially long-term payment options—help them make buying decisions. Some business buyers think of their budget in terms of total costs. Others think in terms of monthly revenue and expenses. Payment options actually make budgeting easier for those customers determining a monthly ROI.
Choose a full-service financing partner. When considering a partner, make sure you can track an applicant’s progress from start to finish without ever getting bogged down in the paperwork. Also, look for a dedicated representative to help with any application.
Myth #5: Financing takes too long.
This is partially true. Old-school financing is a notoriously long, arduous process full of paperwork, red tape, and run-arounds. A bank loan typically takes 60-90 days to process an application. 7.5% of small business reported having to wait more than 6 months to hear about a loan application.
And customers have noticed. 14% of Gen Z business owners would be willing to go through a root canal for a 2-day loan process.
Fortunately, traditional financing isn’t the only option anymore. High-tech options can approve applications in minutes—even seconds—for the smaller amounts that small businesses typically need.
Find a new partner that approves prospects quickly and easily. Don’t settle for “pre-approvals.” Work with finance partners that make applying easy—with no extra hoops to jump through.
Myth #6: Financing is expensive.
Old-school financing relied on matrices and set interest and fees. They’d even charge sellers for submitting an application. With better technology, financing partners can get a better picture of an applicant’s financial situation and create a customized payment plan that fits their needs. It makes an expensive purchase more affordable.
Small businesses operate on especially small margins. Providing a wide variety of financing options gives you the flexibility to say yes when cash isn’t an option.
Provide options for customers with every budget and price point. Remember: financing isn’t one-size-fits-all.
Myth #7: Financing doesn’t have anything to do with sales.
Offering multiple payment options is one of the highest-impact things you can do to increase conversion and grow sales. First-time finance partnerships have shown an average sales growth of more than 16%.
And 75% of customers who use a payments solution like Clicklease say they would have walked away empty-handed without a pay-over-time solution. They also spend more money than they would have if they had to pay cash.
Increase sales, margins, average order value, and conversion rates with Clicklease. Our mission is to make small business dreams possible through the power of affordable payments. With Clicklease’s unique approval process, customers can more easily use their full approval amount. We’ve been shown to increase average order values more than 41%.