Creating New Payment Plans – Part 2

This is the fourth installment in our series, "Establishing Best Practices for Extending Credit in Today's Economy." In our previous blog post, we discussed strategies to consider in developing your customer credit program. One of these is deciding which procedures or types of transactions to include in the program and what types of customers will be eligible for credit. In this blog post, we will focus on the second part: deciding which types of customers will be eligible for credit. Strategies for Assessing Credit Risk When it comes to deciding who is eligible for extended payment terms and who is not, the decision should be based on a defined business strategy for offering credit and then on criteria that is consistently applied to all applicants. First, let’s discuss strategies for offering credit. A properly designed credit program serves a business purpose. This may be to stimulate sales, provide a financing option to customers, or supplement an outside financing program. Within the context of the business purpose, a decision should be made regarding how much credit risk is acceptable. For example, if the business purpose is to stimulate sales of a service, but stringent criteria are set for credit approval, the business may find a higher than desired percentage of applicants is declined. On the other hand, setting more lenient credit criteria may result in higher missed payments and bad debt situations. That said, it may be acceptable if the service is highly leveraged in terms of cost of sale, and the increased business volume generates additional profits that justify the bad debt dollar risk. Credit risk should be assessed based on the business purpose and should be well understood prior to commencing the program. The business [...]

2016-10-29T16:36:45+00:008:30 am|

Creating New Payment Plans – Part 1

This is the third in our series, "Establishing Best Practices for Extending Credit in Today's Economy". In our previous Best Practices’ blog post, we discussed the value of developing a written plan for extending credit and formalizing the credit process. As part of developing an overall strategy behind offering credit to your customers, you should decide which procedures or types of transactions to include in the program and what types of customers will be eligible for credit. In this blog post, we will focus on the first part: deciding which procedures or types of transactions to include in the program. Leveraged Transactions Leveraged transactions or procedures of all sizes are good candidates for selling on credit terms. Why? Because the fee you charge is high compared to the hard cost you incur to provide the service or procedure. Couple this with requiring a down payment and/or charging interest over the term of the payment plan, and lending risk can be minimized or eliminated, while growing the business and generating a high level of wealth creation for the owner(s). Let’s look at an example from the dental market and also compare this to the results you obtain using outside of third-party financing. To start, outside financing may seem attractive on the surface because the dentist gets paid immediately. If the need for immediate cash flow is critical to the dentist, an outside financing program is an option that should be considered. However, the dentist does take a discount on their fees and the lender will only approve certain patients. Also, only certain procedures are eligible for financing often at less than 100 percent financing. As a result, the dentist's revenue potential from the highly leveraged procedure is [...]

2016-10-29T16:36:45+00:008:15 am|

Getting Organized to Extend Credit

This is the second in our series, "Establishing Best Practices for Extending Credit in Today's Economy". According to a 2008 survey conducted by GfK Roper Public Affairs and Media, when faced with a medical expense over $1,000, one out of 10 people surveyed stated that they would seek a payment plan/monthly payments from the service provider to help in paying the expense. This was before the impact of the credit crisis was really felt by the general population. Today, one can assume, if asked the same question again, that a higher percentage of people would seek payment assistance in the form of a payment plan. If your business recognizes the need to extend credit terms to your customers, you probably also realize that it would be a good idea to have a plan in order to execute successfully and avoid unnecessary repayment risk. There are several areas to consider when getting organized to extend credit. In this blog post, we will highlight "best practices" to assist you in successfully extending credit to your customers. Develop a Written Plan A plan defines the goal behind offering credit terms, a roadmap for everyone to follow in executing the plan, as well as the metrics to measure its success. Putting it down on paper forces you to really think about what is involved, offers you the ability to get valuable feedback before implementing, and the ability to share it with everyone on your team. This ensure that it is properly executed. Understand Lending and Privacy Compliance Requirements Extending credit terms is lending and is, therefore, subject to a number of state and federal consumer lending and privacy laws and regulations. It is a best practice to seek out professional [...]

2016-10-29T16:36:45+00:008:32 am|

The Need for Extending Credit is More Important Than Ever

This is the first in our series, "Establishing Best Practices for Extending Credit in Today's Economy". Successful businesses in elective healthcare, dental care, and veterinary services use customer financing to maintain and grow their sales. Like accepting different forms of payment, such as credit cards, extending credit is becoming more popular as another method to help close a sale, while enabling customers to financially secure services they would otherwise not be able to afford. Unfortunately, given the current tighter credit standards and the increase in consumers with FICO scores under 650, access to consumer financing has become significantly limited making the financing that is available more expensive for these businesses. For example, approval rates for traditional financing through credit cards or lending institutions have seen a significant double-digit decline causing many consumers to forego non-essential elective healthcare services and creating a significant revenue decline for elective healthcare providers. The credit crisis has also impacted many other B2C industries, such as education, legal, home improvement, luxury goods & services, and others that suffer from the lack of effective third party financing. DIY - extend your own credit The choice for many businesses is between offering their own payment terms or doing nothing, forgoing the much-needed revenue and crossing their fingers that the economy will improve soon. As a result, many businesses are now turning to extending credit via internally funded payment plans as a way to close the gap and create a "win-win" for their business and their customers. Extending credit through payment plans is hardly a new concept. For many types of businesses this is an accepted and well-understood practice that has helped them grow their sales and maintain customer loyalty. And, importantly, steady cash flow. [...]

2017-01-18T18:02:04+00:008:10 am|

35% of the population now has a FICO score below 650

According to a blog post on today by John Ulzheimer, President of Consumer Education of and the author of the book “You’re Nothing But A Number", over 35% of the population in the United States now has a FICO score below 650. As stated in the post, that 650 score break is meaningful because in today’s financial services environment many lenders and insurance companies consider the +/- 650 point to be the dividing line between prime and sub-prime. What this means is more consumers are going to be denied or adversely approved (that means you’re approved for a loan, but with punishing rates or terms), and scores that are trending lower will continue to do so for many years to come. This reinforces the fact that the market for consumer financing is very challenging and looks to remain that way for years to come. Approval rates for conventional customer financing look to remain very low and terms for those lucky enough to qualify will be expensive. What we have seen is a gradual increase in the number of subprime lenders coming into the consumer financing market to fill part of the gap being left by conventional lenders. Unfortunately, even with these two sources of external financing approval rates are still well below 50% and terms are expensive for the borrower. works with many conventional and subprime lenders because we complement their lending programs. For their business customers, solves the problem of low approval rates by enabling these businesses to offer their own internally funded payment plans. Because automates lending best practices and offers the business instant credit and fraud verification, repayment risk can be minimized while generating needed sales for [...]

2016-10-29T16:36:45+00:008:05 am|