In a business’s life cycle, everything from attracting and retaining customers to meeting and beating prices can get in the way of long-term success. But a recent survey by the Corporation for Enterprise Development throws another factor into the mix that affects vendors in a big way: cash flow.
Anywhere between 37 and 40 percent of businesses lack the cash to cover expenses at one time or another. As a result, business owners must scramble to run their businesses on lower levels of working capital.
Without a “rainy day” source of capital, your customers risk late payments the minute their receivables arrive late. On top of that, if business owners are strapped for cash, they’ll start looking for alternative sources of capital or ask you to extend the terms of their next order. Either way, a lack of financing options leads to a more conservative approach to your customers’ purchasing decisions.
Luckily, by restructuring your financing options, you might be able to convert those tricky customers.
The Benefits of Providing Financing Options
When you add financing options to your services, you give customers an outlet that’s more supportive of their needs. In the B2B space, not offering financing options could very well be the reason your prospects aren’t buying. By providing this service to your customers, you:
- Allow customers to focus on inventory management decisions.Take a boutique chocolate shop, for example. By allowing its owners to finance their purchases prior to Valentine’s Day, they can make decisions based on price and selling opportunities rather than how much they can afford this month.
- Enable customers to “upgrade” their purchases.Allow your customers to choose an annual package instead of a monthly one. Even with the interest of financing, this option is often more cost-efficient.
- Strengthen your buyer-vendor relationship.Empowering customers by offering alternative financing options goes a long way toward building stronger B2B relationships, especially for new businesses that may feel stigmatized by financing rejections. After all, the Corporation for Enterprise Development found that 47 percent of businesses younger than three years old have damaged or insufficient credit histories that limit their traditional financing options.
- Offer an affordable means to accelerate growth.Interest on payday loans can be as high as 521 percent. They may be able to accelerate growth, but you have to question their affordability and sustainability. By offering financing options, you may be able to provide customers with lower interest rates that allow them to grow in a more cost-effective way.
Becoming Part of the Solution
Once you’ve decided to offer financing options, it’s time to develop a solution for your customers. Here’s how to get started:
Know your customers’ cash flow.You should be aware of their potential to be approved for financing. Contact customers via email campaigns or give them a call before their usual purchase date to make sure they have the financing they need.
Map out your customers’ purchase cycles. If you notice that customers have strayed from their regular purchasing habits, that might be an indicator that you need to get in touch and offer financing solutions.
Know and anticipate customers’ needs. If you have customers that stock up on inventory for the holidays and might not have the cash in place to make a purchase, incorporate financing solutions into your regular holiday promotions. If there are particularly busy seasons that are a stretch for your customers with accounts receivable, get in touch with them individually to offer financing.
At the end of the day, waiting on accounts receivable can keep a potential customer from closing. And when you’re losing customers because of cash flow issues, something needs to change. Reach out to your customers to offer an alternative. They’ll thank you with their business.
Benjy Feinberg is co-founder and CEO of Behalf. Committed to the power of building relationships between small businesses and vendors, Behalf provides small business purchase financing and works with vendors to increase sales by offering financing options to their customers.
