Do your Customers Live Paycheck to Paycheck? According to the CFED, (Corporation for Enterprise Development) nearly half of Americans are living in a state of “persistent economic insecurity”. The CFED report, published in Time Magazine says that 44% of Americans have little or no savings. To bring this closer to home, how many of your employees could write a check for an unexpected expense of $1,000 or more? How many of your employees who should value the product or services that you sell, would be in “trouble” if their next paycheck was delayed a week or two?
Consumer financing is a vital part of most industries who sell products or services with ticket prices exceeding $1,000. In fact, many industries know the majority of their customers are “payment” shoppers. The auto and furniture industries as well as premium electronics rely on financing for the majority of their sales.
There are several types of financing options for merchants to offer.
1) Installment loans are usually less expensive for the merchant to offer as the lender has less risk and less “compliance” costs, but are a real burden for the merchant hoping for repeat business.
2) Revolving credit encourages repeat usage, thus more sales but have higher credit risks and much higher regulatory and compliance costs to the merchant. Another benefit for revolving credit is that often there is much less “paper work” for the consumer and quicker decisions made. This is especially true if the revolving line of credit is through the credit card model that most consumers are familiar with.
3) Self-financing has been around for years, but the costs and skills now required to make good credit decisions coupled with many new consumer protection laws recently enacted have made this type credit less desirable than in the past. Most businesses seriously under estimate the true costs of in house financing.
Granting credit wisely has become an industry of its own. Credit bureau scores have been available since 1969 but new companies are emerging to offer information to better predict coming bankruptcies, to detect consumer fraud, and to better evaluate the non-banked consumers. It is estimated that more than 20% of the U.S. population does not use banks as a way to manage their money, yet some of these folks still want and are worthy of credit.
By providing a third party finance company that offers a compliant product and has access to many of the data becoming available beyond Credit Bureau agencies; your business can improve sales, minimize Accounts Receivables and have confidence that the lines of credit are being handled according to the strict guidelines of the Federal Agencies.
About the Author: T. Warren Center, DMD is the CEO at Dent-A-Med, Inc. Dent-A-Med, founded in 1983, offers many private label revolving credit cards like, The HELPcard. Dr. Center received his Doctor of Medical Dentistry degree at the University of Louisville, Kentucky and has lectured all around the nation on the topic of practice management in dentistry.