A stellar 80.1% is the share of GDP household debt takes for Americans. This may seem like a frightening figure, however, a healthy share of debt means that the economy is booming and this, in turn, creates further opportunities for small businesses. But what if small businesses could have part of the pie? In-house finance is not only an option for those who sell items to the value of a couple a thousand, there are also options for the smaller items that only cost a couple of hundred dollars. Here’s how businesses can tread these waters safely.
Ensure The Finance Has The Liquidity To Back It
Joint ventures or a high level of reserves is often the starting point for those who wish to offer finance to their customers. This is because defaults can happen at any time and that would leave the business out of pocket, not only because no payment is received, but also because the product has left the shop floor. It’s dangerous to fund this type of liquidity with a loan, as the repayments will still need to take place even if the customer defaults on their payments. With joint ventures or savings, these losses are more easily absorbed.
Ensure The Legalities Are In Place
There are different laws that protect consumers and businesses who decide to extend credit and need to familiarise themselves with it. The Truth in Lending Act, for instance, was designed to ensure that consumers not only have a fair and equal opportunity to access credit but that they’re also protected from unfair terms and conditions or lending practices. This allows them to enjoy a peace of mind, and as long as they are acting within the guidelines of these acts, both customers and lenders are protected.
The Opportunity To Increase Sales
Recent studies for online payment gateway service, PayPal, reveals that customers not only spend when they have access to credit but also make that initial purchase due to the availability of credit. Up to 68% of customers say they will increase their order size if credit is made available to them. For businesses, this is a no-brainer as long as they use the necessary tools available to them to secure payments and to ensure their customers meet the requirements.
Not only is a good way to increase sales, but in-house finance also allows businesses to be one step ahead of their competitors. There is also the increase in potential sales for existing customers. Financing is a good route for businesses to follow as long as they ensure they meet the legal requirements and ensure their customers meet the criteria.