As we made clear in our earlier posts on dental patient financing and veterinary wellness plans, the most apparent advantage of in-house financing is the ability to expand your business by reaching out to consumers who may have trouble affording your services. This system has helped thousands of dentists, cosmetic surgeons, and vets provide needed care to patients when they normally would have turned that patient away. However, the advantages of an in-house financing system work just as well outside of the medical space, even in industries that revolve around hard-costs.
In one example, Bill, a general contractor, was looking to expand his business, but found it difficult to differentiate himself from his competitors. At the same time, he also noticed that nearly every contractor in his market was turning down business from clients with credit scores in the neighborhood of 650. If Bill could find a way to finance these clients — with minimal risk to his own business — he could fill a niche left open by his competitors and nearly double his client base.
The key to successful in-house financing is developing a plan that is accessible to the consumer, while minimizing risk for the provider. A contractor’s foremost concern is always hard costs, so Bill set up his payment plans so that these were completely covered in the down payment, with the rest his fees covered in installments. Thus, even if a client defaulted on a payment, Bill knew his hard costs were already covered, and his loss was minimal. Advanced servicing software made it easy for Bill to track and collect on his payment plans, and — as an added benefit — saved him the cost of outsourcing his receivables management services to a third-party company. Right out of the gate, Bill started saving 30% on his accounts receivable costs each month, but the benefits didn’t end there.
Customized in-house financing allowed Bill to cater to countless clients that his competitors had shut out. What’s more, he found the interest from his payment plans generated an added source of income; ensuring money was coming in even when business was slow. By setting up a payment plan that covered his hard-costs upfront, and using advanced software to manage collections, Bill minimized the risks on his end, and expanded his business dramatically.
In the coming weeks, we’ll look at other examples in different industries, from Plastic Surgeons to mattress retailers, and take a look at some hard numbers that prove how in-house financing can be viable in any field.