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Monthly payment plans smart offering from small businesses

Making it as easy as possible for your customers to say yes is important for any business structure – including diversifying the number of ways a customer can pay for purchases.

Whether you are in retail, wholesale or services, you probably already offer a broad spectrum of payment options – cash, cheque, credit card or debit.

But even though it's common among larger companies, one option that many small businesses still overlook is offering a monthly payment plan for larger purchases. It is amazing the flexibility that you can offer a customer when a monthly payment option is listed along with full price.

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Whether it is for my insurance, vehicle, mortgage or renovations, monthly payments allow me to acquire wants and needs conveniently in line with my incoming cash flow. Your business can build business by doing the same.

Instead of handling it in-house, it's often better to form an alliance with a third-party financing company that can offer even more flexibility than you can.

A financing company may have much more robust programs, including six- and 12-month, no-interest, no-payment plans and longer terms. I've done that in the past in my businesses; with these "special offers," I would sometimes be required to pay a commission on the sale, but that was worked out in advance so I could factor that into my selling and monthly payment price.

It was a popular option for many of my customers, and helped my business significantly increase the sell-through on higher-priced products. The win-win came from the fact that customers got something they could afford to pay for, just not all at once. I sold more and got paid in four days.

One of the downsides of these deals is the paperwork. If you hand the loan application to customers and ask them to fill it out, you can see their faces drop. It's a pain.

Since the entire purchasing experience should be a pleasant one for the client, I suggest you do the following:

1. Contact your account manager at the finance company you are dealing with, and ask for some tips on what parts of the form are critical to be filled out (these forms often request information that is never actually used).

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2. Ask the finance company for the minimum criteria for approval at certain price points. It is much better for you to pre-qualify a customer before you get to the form so that expectations for approval are realistic. You want avoid the negative experience of a customer being turned down. When in doubt, suggest a customer arrange a co-signer.

3. Fill out the form for your customers by asking them questions from the application. This is much more comfortable for them and insures that the form is completed neatly, in full and properly on the first go round.

4. Make sure you get a quick turnaround on the approval so you don't miss the momentum of the selling process. Many companies and can approve instantly or within an hour.

No matter what kind of business you are in, consider expanding financing options for your customers on large purchases. Using a third party to do so will keep you focused on your core business while giving your customers more options.

Special to The Globe and Mail

Chris Griffiths is the Toronto-based director of fine tune consulting, a boutique management consulting practice. Over the past 20 years, he has started or acquired and exited seven businesses.

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