Table of Contents
Financing :
Financing is the term used to provide funds for various business processes such as Making purchases, Marketing, and investing.
Credit financing :
Credit is the act between two parties for purchase and sale where one party provides the goods, services, or money on credit, i.e., lending. The receiving party pays them later with interest.
Credit for customers :
Nowadays, companies provide credit facilities to their customers. They are using the EMI method for selling products. In this process, goods and services lend to the customer on credit. The customers pay later with interest.
Various factors influence financing online purchases. Providing credit facilities can be an excellent tool for marketing your products and services.
Facts to look out for about financing your customers and why :
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Increase in sales :
There are still a lot of customers who ditch shopping carts on reaching payment gateways. Consider, you have wanted to buy your favorite shoes for two months, but you cannot purchase them because you don’t have enough money. What if you get credit? Interesting right! I know. Financing online purchases can help ecommerce businesses in converting their traffic into actual buyers.
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Increase in profit :
When things about profit organizations need to ask themselves, will providing financing for my customers help in growth or not? Well! The answer to this question is yes! Yes! Yes! in the long run, financing online purchases can help drive more customers towards your ecommerce business. How? You see, customers will pay later with interest, and you can generate more profit with interest.
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Increase in the customer base :
Every business would love more customers since more customers mean more growth. Financing online purchases will help increase your customer base. More and more customers would buy from you as they can purchase without paying instantly. Your organization will create more loyal shoppers who will buy from you again and again. Hence, the large customer will ultimately pave your road to growth.
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Be ahead of your competitors:
Financing online purchases for your customer indicate trust. The consumer feels more associated with you. Credit customers will always give you a competitive edge over your business competitors. Consider, you are the owner of a boutique, you have several competitors in your area. If You provide a credit purchase facility for your customers, your business will allure more shoppers. You are ultimately giving you a competitive edge over your rivals.
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Revolving credit :
It is a term used to provide a credit facility where customers can borrow money repetitively up to a specific limit set by the lending company. Uncontrolled credit can increase the buying power of individuals. Purchasing power gives them a habit of purchasing without having a second thought. Customers with revolving credit will encourage your ecommerce sales and overall profit.
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Open credit:
It is the term used for accounts with unlimited credit. Since customers with open credit account form the habit of buying without thinking, they have more purchasing power than any other credit customer. Financing online purchases for such types of customers can be a substantial profit-making scheme for your e-commerce business.
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Conversion rate :
Half of the online traffic doesn’t make purchases even after selecting products due to a lack of money. Financing online purchases can increase the conversion rate on your ecommerce website. Assume 90% of your ecommerce traffic make actual purchases rather than just being a visitor. Dreamy right? Well! Providing a credit facility can help you with that.
Despite the advantages of financing online purchases, there are also a few facts and disadvantages that come with providing credit to your customers. Here is the list of little known facts that can cause loss for providing financing :
Constant monitoring:
Financing online purchases can increase the workload of organizations. e-commerce businesses want to recover every penny from the customers. So they need an extra workforce to keep track of all the credit customers to refrain from losses.
Unrecovered debt :
Some customers may perform fraudulent activities while asking for credit. For instance, one of your credit customers may take a long time to repay. Thus increase your chances of not recovering later. In that case, your business will have to bear the loss. Unpaid debts can increase your liability and harming your reputation.
Reduced cash flow :
Business financing online purchases can affect their liquidity. Providing more credit means reducing your cash flow. Low liquidity will make other activities of business slow and Problematic. Consider, You are a fashion house, you need to buy raw materials regularly, and lack of cash flow in your business will affect your purchases, thus reducing overall manufacturing.
Before moving forward with the credit customer facility, ecommerce businesses need to perform in-depth research. Every business needs to think, research, and consider financing online purchases after looking at advantages and disadvantages. However, credit customers can be a creative move for your organization.
