It’s a common and frustrating problem for small businesses: a customer wants to purchase from them but needs help with financing, and the business’s limited financing options don’t meet the customer’s needs. While both parties want to make a deal and work together, this scenario too often results in a lost deal.
The issue isn’t that small businesses are unwilling to work with their customers; it’s that these businesses are limited in the kinds of financing they can offer that are viable and economically sound for them.
The Financing Gap
Many vendors recognize the need to offering finances to customers for both large and small purchases and are willing to do so. A recent survey found that most suppliers offer 30, 60, or 90-day net terms, and with many also offer larger loans for major purchases in the range of 12-36 months.
But, what about all those spaces in between? This disparity is called the financing gap, and it can impact up to 80% of small business customers.
A Choice for Small Business Owners
This situation can create a real liability for business owners—or an opportunity to demonstrate customer centricity and grow their business. The financing options a business has available can make the difference between losing new business and winning a loyal customer.
On the one hand, approximately 70% of B2B buyers conduct some form of comparison shopping before making a purchase. If all other factors are equal, a more specific and buyer-friendly financing option may be the reason a customer chooses to buy from you instead of a competitor. But the opposite is also true. You might also lose a sale because the customer prefers the option they receive from another company or simply can’t make your financing option work due to their own constraints.
On the flip side, offering more financing options creates a win-win scenario for businesses and customers.
On the practical side, offering more tailored financing options gives customers more buying power. That enables your customers to get the goods and services they need and helps them purchase these items from you, rather than forcing them away from a purchase they want to make but can’t afford.
In addition to providing customers with opportunities to buy from you that they didn’t previously have, giving customers more buying power potential opens the door to make each purchase or engagement more meaningful. For example, the customers might increase their order volume or frequency. Or, you might cross-sell additional products and services to them, or up-sell them to a more premium product.
These changes can add up to business impact quickly. Many growing B2B companies have seen massive gains in these areas by introducing more modern, buyer-centric financing options, such as:
- 10x growth in average order value
- 29% increase in order frequency
- 50% boost in conversion rates
Customers will also recognize the customer service of companies who worked with them on financing and often repay these companies in loyalty or referrals.
For businesses who can successfully implement flexible financing options, the possibilities are endless!
Click here to learn more about CreditKey and alternative lending options for small business.
Additional Resources for Small Business Owners
Dun & Bradstreet offers educational resources and insights to help small business owners realize their dreams of becoming entrepreneurs and growing successful businesses. Explore our website for more small business management tips and inspiration.
*The information provided in articles and blog posts are suggestions only and based on best practices. Dun & Bradstreet is not liable for the outcome or results of specific programs or tactics. Please contact an attorney or tax professional if you are in need of legal or tax advice.