Offer finance for a retail business

Offer Finance for a Retail Business

Retail businesses, whether online or brick-and-mortar, often need financial assistance to expand, manage cash flow, or invest in new stock. Offering finance solutions to your customers can not only boost sales but also increase customer loyalty by making larger purchases more accessible. In this article, we'll explore how to offer finance for a retail business, the benefits it can bring, and how companies like Kandoo, a UK retail finance broker, can help streamline the process.

Why Offer Finance in a Retail Business?

In today's competitive retail environment, consumers are increasingly seeking flexible payment options. The ability to pay for goods in instalments or defer payments can be the difference between making a sale and losing a customer to a competitor. Here are some reasons why offering finance can benefit your retail business:

1. Increased Sales

Offering finance allows customers to purchase higher-value items without the burden of paying the full amount upfront. This can significantly boost average transaction values. A customer might be hesitant to spend £1,000 in one go but may be more inclined to do so if they can spread the payments over several months.

2. Improved Customer Loyalty

Providing flexible payment options can enhance the customer experience, building trust and fostering loyalty. Customers appreciate businesses that make purchases more affordable and convenient, which encourages repeat business and positive word-of-mouth referrals.

3. Competitive Advantage

With more consumers expecting flexible finance options, not offering them could put you at a disadvantage. By incorporating retail finance solutions into your business model, you can differentiate yourself from competitors who may not offer this convenience.

4. Better Cash Flow Management

Retailers who offer finance are often paid upfront by the finance provider, even though the customer is paying in instalments. This allows your business to maintain a healthy cash flow, reducing the risk of cash shortages that can hamper operations or growth.

Types of Retail Finance Options

There are various types of finance solutions that can be offered to retail customers, each designed to cater to different needs and financial situations. Understanding the available options will help you select the best solution for your business and your customers.

1. Interest-Free Credit

Interest-free credit, also known as 0% finance, is a popular option where the customer pays no interest on the amount borrowed. This type of finance is typically offered over a fixed period, such as 6, 12, or 24 months. The retailer usually absorbs the cost of the interest, making this an attractive option for consumers.

2. Buy Now, Pay Later (BNPL)

BNPL allows customers to purchase goods immediately and defer payment for a set period, typically between 30 and 90 days. After the deferral period, the customer can either pay the full amount or choose to spread the cost over a longer term, sometimes with interest.

3. Hire Purchase

Hire purchase is a finance option where the customer hires the goods from the retailer and pays in instalments. Once the final payment is made, ownership of the goods is transferred to the customer. This is commonly used for higher-ticket items like furniture or electronics.

4. Personal Loans

Personal loans offer customers a lump sum that they can use to make a purchase, with the loan repaid over an agreed period. While this option typically involves interest payments, it provides flexibility for customers who may want to borrow larger sums of money.

5. Store Credit Cards

Some retailers offer store-branded credit cards that allow customers to purchase items on credit and pay back over time. These cards may come with specific benefits, such as loyalty points or discounts, but can also carry high interest rates if balances aren’t paid off in full each month.

How to Implement Retail Finance in Your Business

Offering finance to your customers requires more than just advertising payment options; you need to partner with a finance provider who can facilitate the process. Below are the key steps to implement retail finance in your business:

1. Choose the Right Finance Provider

The first step is to partner with a reliable finance provider who specialises in retail finance. Providers like Kandoo, a UK-based retail finance broker, can offer a wide range of finance solutions tailored to your business. Kandoo works with a network of lenders to provide flexible finance options, allowing you to offer your customers competitive payment plans.

By working with a broker like Kandoo, you also gain access to expert advice and guidance on the best finance options for your business. They can help you navigate the legal and regulatory requirements of offering finance, ensuring that your business is compliant with UK financial regulations.

2. Integrate Finance Options into Your Sales Process

Once you’ve selected a finance provider, the next step is to integrate the finance options into your sales process. This can be done both online and in-store.

For online retailers, the finance option should be clearly displayed at checkout, allowing customers to apply for finance before completing their purchase. For brick-and-mortar stores, train your sales staff to offer finance as part of the conversation when discussing high-ticket items.

3. Ensure Compliance with FCA Regulations

In the UK, offering consumer finance is regulated by the Financial Conduct Authority (FCA). As a retailer, you may need to obtain FCA authorisation, depending on the type of finance you offer.

However, by partnering with a broker like Kandoo, you can simplify the process, as they can manage the regulatory aspects of offering finance on your behalf. This allows you to focus on running your business while ensuring that you remain compliant with UK law.

4. Promote Your Finance Options

Once your finance options are set up, it’s essential to promote them effectively. Make sure your customers are aware of the payment options available to them. Use in-store signage, website banners, and social media to highlight the flexibility and convenience of your finance offerings.

You can also include information about finance options in your marketing campaigns, emphasising how they make it easier for customers to purchase high-value items. Clear communication is key to ensuring that customers understand the terms and benefits of financing.

The Role of Kandoo in Retail Finance

Kandoo is a UK-based retail finance broker that helps businesses offer flexible finance options to their customers. They work with a panel of lenders to provide a wide range of finance solutions, including interest-free credit, personal loans, and BNPL schemes.

Here’s how Kandoo can support your retail business:

1. Access to Multiple Lenders

One of the key benefits of working with Kandoo is their access to a broad network of lenders. This means they can offer your customers competitive finance options that suit their individual needs. Whether your customers are looking for interest-free credit or a longer-term loan, Kandoo can match them with the right lender.

2. Easy Integration

Kandoo’s finance solutions are easy to integrate into your existing sales process, both online and in-store. They provide the tools and support you need to offer finance seamlessly, ensuring a smooth experience for both you and your customers.

3. Expert Guidance

Kandoo has extensive experience in the retail finance sector, which means they can offer expert advice on the best finance solutions for your business. They can also help you navigate the complexities of FCA regulations, ensuring that your business remains compliant.

4. Customer Support

Kandoo provides ongoing customer support to both retailers and their customers. This ensures that any issues or queries are resolved quickly, providing peace of mind for your business and enhancing the customer experience.

Challenges to Consider When Offering Finance

While offering finance can bring many benefits to your retail business, there are also some challenges to consider:

1. Regulatory Compliance

As mentioned earlier, offering consumer finance in the UK is regulated by the FCA. Navigating the regulatory landscape can be complex, and non-compliance can result in significant penalties. This is why partnering with a broker like Kandoo is essential to ensure that you meet all legal requirements.

2. Costs to the Retailer

Depending on the type of finance you offer, there may be costs involved. For example, with interest-free credit, the retailer typically absorbs the cost of the interest. It’s important to weigh these costs against the potential increase in sales and customer loyalty.

3. Credit Risk

When offering finance, there’s always the risk that a customer may default on their payments. However, by working with a reputable finance provider like Kandoo, this risk is managed, as the provider takes responsibility for credit checks and managing repayments.

Conclusion

Offering finance for a retail business can be a powerful tool to increase sales, improve customer loyalty, and gain a competitive edge. By providing flexible payment options, you make it easier for customers to purchase high-value items, while also benefiting from improved cash flow and repeat business.

Partnering with a reliable finance provider like Kandoo can simplify the process of offering finance, providing access to a wide range of finance solutions and expert guidance. By integrating finance into your sales process and promoting it effectively, you can unlock new opportunities for growth and success in your retail business.

Whether you're a small boutique or a large retailer, offering finance can transform the way you do business, making it easier for customers to buy what they need while helping your business thrive.