Lending is becoming ever more flexible, and finance, in general, is democratized. TransUnion reports that in the second quarter of 2022, the total balance of personal loans reached $192 billion, reflecting a 31% increase from the same period in 2021.
In-house financing empowers both businesses and their customers to increase their spending power and does so at a singular point for service. From in-house customer financing for cars, insurance, and more, the industry is developing at a rapid pace never seen before. The only question that remains is how to follow the trends and what in-house financing software is good enough to improve your bottom line tomorrow.
What Is In House Financing and Why Offer It?
In-house financing is financing provided by a retailer to facilitate the purchasing process for customers, i.e. providing a loan to complete a transaction.
This financing type goes back a while, almost to the beginning of money itself. However, in recent history, two historical events have marked its rise. The first was the financial crisis of 2008 when businesses had to stop and rethink their current strategies to remain viable. The second is more recent.
Why Digital Lending is More Powerful than Ever Since COVID-19 hit the headlines in early 2020, companies have been seeking out new ways to ensure the services they offer deliver maximum efficiency and less legwork for the client. In-house financing offers:
- Point-of-Service efficiency. Instead of going elsewhere to seek out financing or using a credit card that may have high-interest rates, customers can seamlessly apply for credit in-store. This lowers the risk of a broken sales funnel, meaning a purchase is more likely. In addition, this speeds up the process for the customer, allowing them to get the service or product they need even faster.
- More sales overall. By having more control over how they pay for a product or service, clients feel empowered to make a purchase safe in the knowledge that they can afford it. Not only does this increase the amount of the sale, but it also means they are more likely to purchase more.
- Higher levels of trust. Retaining clients is a crucial part of any business strategy, and one way to do that is by building trust. Flexible finance options show that a business understands its customers’ needs and is willing to empower them with purchase power.
- Simplicity. No one wants an overcomplicated purchase process. Instead, clients seek out simplicity—transparent financing, straightforward process, and excellent customer service.
How In-House Financing Works in Practice
Now that you know the benefits of in house customer financing let’s look at how it works in action. What happens when a client comes to your business to purchase a product or service with POS finance?
1. Customer seeks out your business
At this stage, they will be assessing whether the product or service you offer is right for them. If they decide on a product/service, they may now determine how financially viable it is for them to own it.
2. Applies for financing
If your client is unable or doesn’t want to make the purchase outright. Offering alternative financing can help them make the decision to purchase now or later. At this stage, they can apply for flexible in-house financing that works for your specific product or service.
3. Customer’s application is approved (or denied)
Once the application is in, you can run it through your internal systems to check the creditworthiness of the client and the terms you can offer them. Using the smart point of sale lending software, your business is empowered to know whether or not this is a profitable decision. For the client, the waiting time is minimal, and they will often be able to walk out of the shop with a clear yes or no answer, or at the most within a couple of days.
Top 5 Businesses Set to Benefit from In House Customer Financing in the Next 5 Years
In-house financing is an increasing trend in almost all industries. However, in these top 5, it’s fast becoming the new norm. Without further ado, here they are:
No.1: Car dealerships
Lending Platforms in Automobile Finance Industry: Auto Lending Trends 2022 A vehicle is a sizable purchase, no matter the budget, and it’s a serious investment. For many, the only way to own a vehicle is with credit. That’s why, for automobile dealerships, it makes sense to onboard in-house financing and allow clients to get the service they need all in one place. Adding POS finance also gives dealerships the power to create finance conditions—repayment rates, conditions, etc.—that suit their particular industry, not generalized credit.
No.2: Medical and dental services
When it comes to healthcare, time is of the essence, and getting treatment at the right time sets your clients up for success. However, for many, medical treatment isn’t free, and sometimes the costs are unaffordable for the client to pay in one lump sum. In-house lending with healthcare finance software allows clients to get the treatment they need when they need it and get better outcomes in the long term.
No.3: Retail products
From a new fridge to technology to something else entirely, when it comes to retail products, your clients may not always be able to afford them right away. Instead of creating a dilemma or forcing a potential customer to wait, it makes sense to offer them an alternative way of paying and getting a product today with in-house finance. This may be particularly effective for those who need to make multiple purchases or are seeking a luxury item.
Back in the day, they used to say that an engagement ring should cost 3x the salary of the person giving it. At today’s rates, statistics show that couples are spending on average between $3,756 and $7,829 on their engagement ring. And for most, this isn’t the only jewelry they’ll purchase in their lifetime. Offering smart in-house financing allows for people to spread payments for a large or valuable purchase out over time and get a piece of jewelry they’re truly happy with.
Innovative Student Loan Software Solutions: Where to Start In the last 50 years, education has become more accessible than ever, and that trend is continuing today. Unfortunately, education is not always free. Universities and private courses often charge fees for the services they provide, and for some, this unattainability creates a gap in society. In-house financing empowers educational facilities to offer their clients more at a rate that suits them. This allows clients to access education while not experiencing financial stress from exorbitant fees that need to be paid right away.
How to In House Finance with Ready-Made Lending Software
Starting in house financing, every retailer faces the question of whether to engage with a third-party lender or equip a lending platform to lend without any third parties. The choice and the decision-making factors may vary from retailer to retailer, however, 3rd party lenders provide the following benefits:
- Retailers are out of risk.
- Retailers don’t need to expand their teams and train people to handle new processes.
- Retailers are uninvolved in lending processes after the payment is made.
Meet HES LoanBox: Ready-to-Use Lending Platform When it’s possible to use an option to shove the majority of lending tasks on a lender, it’s hard to compete and offer to try in house financing software. However, with complete process automation delivered by HES LoanBox retailers don’t need to put much effort to lend in house. Here’re the key benefits of the platform:
- Time to market is up to 2-4 weeks
- Enhanced automation for both employees and borrowers
- Smart scoring module
- Available loan product engine
- 3 components in a single product: onboarding, back office, and borrower portal + dozens of available integrations
If you have already decided not to engage with a third-party lender in favor of the ready-made lending solution HES LoanBox, here’s more about it.
The digital onboarding component allows you to select custom brand colors and a logo to design your landing page. LoanBox offers intuitive navigation, an FAQ section, a real-time loan calculator, and more. The page is designed to effectively navigate borrowers through your website to involve them in communication and finally apply for a loan.
- Marketing-effective landing page
- Data verification (KYC)
- Fully digital process
- Security and data protection
Borrower portal is made to provide borrowers with insightful loan details and extensive control over loan applications, active loans, and activity history. The component is 100% flexible and can be adjusted to any business model. The platform comes with robust security features and personal data protection to help you improve customer satisfaction and build a loyal customer base.
- Intuitive application flow
- Smart calculator
- Complete app management
Back office is the heart of the lending platform that provides a lender/retailer with a detailed overview of the process, including loan application, active loans, underwriting, amounts, and lending decisions. The platform is empowered with a decision-making engine that can be adjusted to fit your business processes, while scoring and underwriting can be performed either with or without manual application screening. What is more, the system is enriched with role management and duties segregation, calculation, product engines, statistics, and reporting, etc.
- End-to-end loan origination and management
- Easy to adapt to any business environment
- Automatic notifications and updates
- Higher customer involvement and loyalty
HES FinTech and VoPay Partnership: Lending Powered with Leading-Edge Payment Processing In addition, HES LoanBox can be integrated with a variety of tried-party apps and solutions, such as KYC, SMS/Email, credit bureaus, payment providers, and many more. Here you can find a full list of HES LoanBox integrations.
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What You Need to Know before Offering In-House Financing
Onboarding in-house financing is a valuable development for many companies. However, it’s not a decision to be taken lightly. To get your business POS finance ready, you’ll need to do a bit of preparation first.
First things first, it’s vital to assess whether or not in-house financing is a viable solution for your industry. Often adding POS finance can work smoothly when done with the help of the right team, but, in some cases, it may not be the best option at this time. For example, this is particularly the case with small businesses, those whose customers already have an established credit system, or where it simply doesn’t meet the company’s business objectives.
Secondly, once you’ve assessed viability, it’s time to move on to deciding how and when in-house financing will be applied within your business. This is a decision individual to every company and should be done to complement the overall business plan.
Thirdly, decide on a provider. For most businesses, the decision to integrate in-house financing means getting outside help. With many specialists on the market offering software services, it can be difficult to know where to turn to get the tools you need. To do this, make sure you seek out companies with established case studies that are experienced in helping businesses onboard finance.
In following these steps, you set your business up for success when adopting new technology and get the potential for it to work to its fullest.
Interested in HES LoanBox? Contact our team to book a demo.