Customer financing is an important tool for businesses to maximize sales and to keep customers. It’s something customers increasingly expect businesses to offer as a standard. If you don’t, you risk losing them to competitors that do.
What is customer financing?
Customer financing is a way for businesses to offer payment plans to pay for products or services over time. It’s a useful tool that can help businesses keep customers happy, sell more, and stay competitive.
In this article, we’ll explain why it’s important, and the different approaches you can take to offer it in your business. We’ll also talk about Paythen, a tool that can help you easily offer and manage customer financing with no code, low fees and while retaining full control of your brand and customer relationships.
Here’s what we’ll cover
We recommend reading from start to finish as each topic flows into the next, but you can jump straight to relevant sections too.
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- Why should I offer customer financing? The pros and cons for small business owners. Jump to section
- Should I even offer customer financing? How should I decide if my business is suitable? Jump to section
- Getting started with customer financing. The approaches to consider. Jump to section
- Customer financing for service businesses Jump to section
- Customer financing for travel and tour businesses Jump to section
- Customer financing for businesses with high-value items or large transactions Jump to section
- Customer financing for eCommerce businesses Jump to section
- An overview of Paythen – an easy tool to offer customer financing while retaining control Jump to section
In recent years, what used to be a niche offering, has become mainstream because of buy-now-pay-later (BNPL) companies like AfterPay, Klarna and Affirm. These companies have made customer financing more popular across businesses of all sizes, and have created an expectation from potential customers.
However, these BNPL options can be quite limited in terms of the businesses that can use it, and customers that are eligible (especially if your customers come from multiple countries). The fees can also be very high (often between 6% and 12%) – for you as the business owner, and in some cases, very high interest rates for your customers (up to 24.99% APR).
Below, we outline the benefits, downsides and the approaches to consider if you’re planning to offer customer financing. This article is primarily focused on customer financing for small and medium sized businesses.
1. Why should I offer customer financing? The pros and cons for business owners.
The biggest reason to offer customer financing is it typically helps you sell more. It makes your product or service accessible to more customers, which in turn, increases your sales and revenue.
It also increases the average order value – customers tend to buy more when you make payments bite-sized and more affordable.
Instead of spending $1,000 on one product or service now, they can now more easily afford $1,500 spread out over many payments. This can have a big positive impact on your revenue over time.
Another reason is to keep your customers. People increasingly expect a financing option as a standard. By not having this, you’ll lose some potential customers to competitors that do.
From our own aggregated data, we see that between 40% and 60% of customers choose a payment plan option when it is available and easy to use. While some of these customers would pay in full if that was the only option, many would not.
However, there are some challenges too – depending on how you choose to approach it, you either sacrifice a large part of your profit margins to get paid immediately and take on no risk (if you use a BNPL provider), or you get paid as customers pay you and take on some risk, but with lower fees (which you can pass on entirely to customers).
Another challenge of offering customer financing in the past was the administration of managing this – it typically required additional admin and associated costs. However most modern providers (should) make this very easy to offer and manage with easy to use dashboards, automations and reports.
2. Should I even offer customer financing? How can I decide if my business is suitable?
While most businesses typically benefit from offering some sort of customer financing, it’s not always suitable. Consider what you sell, where and how many customers you have, and whether offering financing is right for your business.
The best way to see if it’s right for you is to try it out. Implement a quick and easy option and see how it affects your sales and revenue over 5-6 months. Most businesses will typically see more overall revenue and a larger customer base. This more than offsets any extra costs involved.
The way you structure customer financing is also critical. If you sell a high-value service or item and only offer a short 4 or 8 week payment plan, this might have little to no impact on sales. For many potential customers, this might be too short a period to help with their cashflow.
The goal of offering financing is to take something that customers would consider expensive and spend a lot of time thinking about, and turning it into an easy decision that requires no thought and makes it accessible.
Most buy now pay later companies have low limits – eg: Afterpay has a maximum transaction value of $1,500 (US), so if you sell something that costs more, your customers can’t use this financing option. In this case, offering your own financing option (with a little help) can be more suitable. We discuss the different approaches below.
When offering customer financing it’s important to ensure you’re in control of whatever approach you choose to take and that it is right for your business, your customers and your brand.
3. Getting started with customer financing. The approaches to consider.
Thinking about offering financing to your customers? There are two broad approaches – doing it yourself (with some great software to help), or outsourcing it to a buy-now-pay-later company like Affirm or Afterpay.
Approach One: Do it yourself (with a little help)
You manage it yourself – retain control of your brand, customer relationships and the flexibility to offer financing exactly how you’d like to. This approach can be very flexible but can involve some work and added risk of defaults.
However with easy customer financing software like Paythen, this is very simple to manage with minimal added admin.
Paythen automates the process and gives you a full admin dashboard so you can easily track everything. With this approach, you can offer financing to all your customers anywhere in the world, and even in different currencies.
You can choose to add surcharges and additional fees, incentives to repay early, discount codes, billing intervals that work for your business – whether it’s 8 weeks, 6 fortnights, 12 months, and much nore.
When you choose this approach, you remain in control of your customer relationships, and your brand. All emails and customer-facing pages contain your logo and colors and there is no platform trying to take your customers away.
Unlike the second approach, most businesses in most industries across the world, with customers based anywhere can use this. The only criteria is you have to be able to open an account with a payment processor like Stripe to process payments. Stripe is available to businesses in 47 countries and your customers can be in any country. Even businesses that are not in supported countries can use Stripe as long as they have a legal entity based in the US or another supported country.
Approach Two: Outsource it (more $$$ and higher fees, if you’re eligible)
Outsource it to a buy now pay later company like Klarna, Affirm, or AfterPay. With this approach, you pay a much higher fee, and give away your customer relationships to these companies – your customers essentially become their customers. You also have no flexibility in how you structure your customer financing. In exchange though, you take on zero risk and can get additional sales driven by these platforms (with lower margins). Over time, it is common to lose your customers to these very platforms though as they become shopping super-apps and encourage shoppers to begin their shop on their sites (instead of yours).
This can be the right approach for you depending on where you’re based, where your customers are based and the type of product you sell. This approach can be more suitable than doing it yourself if you have access to and are eligible for a deeply integrated solution – eg: if you are a Shopify Merchant based in the US, with customers also based in the US, and your average order value is not higher than their limit, then Shop Pay Installments is a great product.
There are other, more traditional customer financing providers too but they typically have a poor customer experience, and clunky, long approval processes for customers.
4. Customer financing for service businesses
Sell anything other than consumer-focused eCommerce? You’re out of luck when it comes to the standard buy-now-pay-later companies. Most BNPL companies want merchants that sell B2C products, with average order values less than $1,500.
Most businesses that sell services, non-standard products or high value items won’t even get approved.
If you sell a $2,000 course, $5,000 workshop, a $10,000 service, you have very limited and often very expensive customer financing options available – and typically with a terrible customer experience.
With Paythen, you can offer customer financing to all your customers for any amount and over any time period.
A customer financing tool like Paythen is especially suitable to service businesses as you can align the payment plan billing intervals to the provision of the service. This essentially eliminates any risk for you – if the customer doesn’t pay, they stop getting the service. Eg: If you offer a service delivered over 6 months, you can charge the customer an upfront amount, say 20%, and the remainder, over 5 monthly payments, paid in advance. In case a customer defaults on a payment, you can simply withhold the service. If you’re selling a digital product or service, the same principle applies – you can withhold it if a customer stops paying.
With Paythen, you can offer flexible, low cost customer financing that helps increase sales without adding risk for your service business.
5. Customer financing for travel and tour businesses
Do you sell tours? Or travel packages? Are you a bespoke provider of small guided tours through the Mongolian steppes? Regardless of what type of travel or tour packages you sell, Paythen is a perfect way to offer customer financing for your travel business.
Consumers are increasingly searching for travel companies and tour operators that let them pay for their holiday over easy to digest installments. Google searches for “book now pay later travel” at all time highs. Ensure you turn these consumers into your customers with by offering an easy financing option.
You can easily create different payment links for different packages or tours and share them with customers wherever they are – on Whatsapp, email, text message, or your website. You don’t even need a website to share these links since each plan has it’s own page that works everywhere.
If you’re selling a $10,000 tour package that starts in 6 months, you can align your customer financing to that. Eg: You collect an upfront payment, then collect the rest over 5 months, 20 weeks or whatever billing intervals work best for you.
You can completely remove the risk of non-payments by ensuring customers have paid in full before they travel.
You can ask customers to pay the full amount at any time with one click. Eg: If a tour starts on 1 November, you can get all customers that are on a financing plan to complete any remaining payments by 1 October. This makes it easy to collect any remaining payments from all customers by a single cut-off date. To do this, each customer goes to their personalized customer page like this example and clicks the “Pay in full today” button. You can also do this on their behalf.
6. Customer financing for businesses with high-value items or large transactions
If you sell items over $2,000 or your typical transaction is even larger – like $20,000, your options with buy-now-pay-later companies are limited or non-existent.
By using a tool like Paythen that handles most admin and automates everything, you can offer customer financing how you want.
Let’s say you sell farm equipment that typically costs $20,000 or more, and has an 8 week manufacturing/lead time, you can choose to charge customer a 50% upfront deposit on order, and charge the rest over 8 weekly installments. You can then ship the product once all payments are completed.
You can also choose to get customers to agree to a legal contract with your business at the time they sign up, and ship the product or deliver the service immediately – even as the customer continues to make the installment payments. With Paythen, you have complete control over how and to whom you offer customer financing.
Is each order completely different? Want to offer payment plans only to specific customers? Paythen makes that easy too – you can create and send custom plan links to individual customers based on their amounts and different billing intervals. Want a customer to pay over 6 months, and another one to pay over 12? Easily done. Need to add a surcharge for one customer but not for another? Done in one click.
With Paythen, our goal is to ensure you are in full control of your customer financing – you choose how, when and to whom you provide financing, regardless of your average order value, industry or location.
7. Customer financing for eCommerce businesses
Run an eCommerce store on WooCommerce, Shopify or one of the other popular platforms? There are many options available for customer financing – depending on your industry, location and average order value.
For certain eCommerce businesses with average orders under $1,500, and with margins big enough to handle a 6% + cut to BNPL companies, outsourcing this can be a viable option as you take on zero risk, and get paid upfront.
One critical consideration if you’re an eCommerce business is how much you value your customer relationships. How expensive is it for you to get new customers?
BNPL companies need volume – they need millions of customers using them every day to make money. This leads to them promoting their own platform and site as a shopping destination for your customers.
This means your customers, who you worked hard to acquire, are more likely to go to afterpay.com or klarna.com instead of your site for their next shop. On these sites, your business is just one of thousands, and your previously loyal customers are easily distracted by bigger brands, competitors, and deals.
Once a customer has made a purchase using one of these providers, the emails they get are from the buy-now-pay-later company, and not your business. This slowly helps turn your customers into their customers and puts their brand front and center, instead of yours.
If you’re a small business trying to build a loyal customer base, consider how much control (of your customers, pricing and brand) you’re willing to give up in exchange for getting paid upfront.
If you choose the first approach and manage your customer financing yourself, either using a tool like Paythen, or something else, you maintain full control over your customer relationships, your brand, and your pricing. You also pay significantly lower fees, and can pass these on to your customers if you’d like. BNPL companies “forbid” you from passing on any fees, forcing you to absorb the cost.
With Paythen, you can pass on any fees and add surcharges as it suits your business. Paythen offers an excellent integration with WooCommerce with our own WooCommerce customer financing plugin. You install it, configure a few fields, and you’re ready to go with financing on your WooCommerce store.
Paythen has a good workflow for Shopify – but no native app because of restrictions imposed by Shopify. You can read more about our Shopify flow for customer financing here.
For other eCommerce platforms, we don’t have native apps but you can add direct links to payment plans within product descriptions. This approach only works if you plan on offering payment plans for a few products only though. Talk to us via the chat icon to see if Paythen is suitable for your business and for help getting things set up.
For other eCommerce platforms, we don’t have native apps but you can easily add direct links to payment plans within product descriptions. This approach only works if you plan on offering payment plans for a few products only though.
8. An overview of Paythen – an easy tool to offer customer financing your way
We created Paythen because most BNPL companies are too focussed on promoting their own brand, while charging you exorbitant fees.
Paythen has all the benefits of outsourced customer financing and BNPL, while keeping you in control. Instead of outsourcing financing to a third party that isn’t aligned with your objectives, Paythen lets you decide how to do things. Paythen is easy-to-use customer financing software designed for business owners and operators to get started in minutes, while delivering a world-class customer experience.
Paythen lets you decide how to run your business instead of forcing someone else’s business model on you. Paythen is designed to be simple to use, with powerful functionality and automations behind the scenes that minimize admin for you.
Paythen doesn’t require code, or even any technical know-how. It is plug and play and takes only a few minutes to set up.
If you’re looking for a way to offer customer financing but want to retain control of your pricing, your customer relationships and your brand, Paythen may be the right tool for you. We have a fee-free 14 day trial, then just a low 1.4% per transaction with no other fees or charges. No credit card needed.
As with all billing systems, this is separate to the Stripe payment processing fees which are typically between 1.6% and 2.9% depending on your country. Paythen works with and requires Stripe to process payments. You can connect your existing Stripe account or create a new one easily when you sign up for Paythen.
You can accept payments in most currencies Stripe supports (over 130) – at the moment you can't accept zero decimal currencies with Paythen. There are some exceptions and limitations based on your account's currency. View the full list and more info here.
Are you in a country where Stripe is in preview?
Countries that show "Preview" above might have limited functionality as Stripe is just getting started there.You can read more about each supported country, including Stripe fees and sign up for a Stripe account here. Different preview countries might have different limitations.
For some countries, because of legal and Stripe restrictions, Paythen fees cannot be automatically deducted from each transaction like they usually are. In these cases, you can still use Paythen as normal – but your billing will be done monthly at the end of each month via a credit or debit card.
For some preview countries (like Indonesia and the Philippines), Paythen might only work if you have set up a Stripe account using Stripe Atlas but not if your account is based in your home country and currency. This is because of legal limitations in these countries that don't allow external platforms based in other countries to connect to locally-based accounts.
Is your Stripe account based in Japan?
Japan based accounts can use and accept payments with Paythen in all other currencies except JPY at the moment. Paythen does not support zero decimal currencies at the moment but we expect to add support in the future.
Is your Stripe account based in India?
Accounts based in India can currently only accept payments in INR using Paythen – we will be adding support to accept other currencies too, but at the moment, only INR payments can be accepted. If you're using Stripe Atlas with a USD account, then this does not apply.
Is your Stripe account based in Indonesia or the Philippines?
Unfortunately at the moment, due to legal and/or Stripe limitations, Stripe accounts based in Indonesia or the Philippines cannot connect to platforms like Paythen that are based in other countries, like Paythen is. We hope to support both countries in the future if and when this changes. You can use Paythen if you have a US based Stripe account created via Stripe Atlas though.
If Stripe is not available in your country, we recommend looking into Stripe Atlas. It's a great way to form a US company remotely and get all the benefits that come with it.- AfterPay is a credit service. With Paythen, your customers can get get a payment plan, but they can use their existing credit or debit card to do so.
- AfterPay is like a mini-loan, with Paythen, there is no credit provided – this is not only more responsible, but also more flexible and better. Your customers get to choose how they want to pay, and which payment method they want to use, while you pay lower fees and deliver a better customer experience.
- AfterPay has a fixed 8 week repayment period. This is rigid, and can still be very high for high value items. With Paythen, you can set the payment plan interval to whatever you want – weekly, monthly, fortnightly, or any other custom interval – and you also choose how long it goes for.
- AfterPay takes away your direct relationship with your customer – and build their brand, instead of yours. With Paythen, there is little to no Paythen branding involved – we just give you the mechanism to offer split payments, while giving you the reporting and flexibility you need.
- AfterPay takes away a big chunk of your profit margin with each transaction. With Paythen, you get to decide – you pay a low 1.4% per transaction with no monthly or other fees. You do pay the payment processing fee to Stripe, which is the payment processor.
- Paythen is a complete billing and payment system that gives you ease of use, reporting and insights and important features for your customers whereas AfterPay and others are just credit providers.
- Paythen is built on top of Stripe – the world's most popular (and in our opinion, the best) online payment processor. This means from day one, you can accept payments in hundreds of currencies.
- You install our WooCommerce plugin and configure a few options
- On the checkout page, your customers will see a new payment plan option
- They will place the order and be taken to the Paythen plan page to complete payment. Your WooCommerce order status will be "On-hold" while they complete payment.
- Once they have successfully signed up to the payment plan, they'll be brought back to the WooCommerce order confirmation page and the order status will change to "Processing".
- Customers will get an email from Paythen with their payment plan details and dates, in addition to any emails you have configured in WooCommerce
- You can see their payment plan and information in the Paythen dashboard
- Your customers will be automatically charged for each future payment
Want more detail? Here’s a side-by-side comparison of outsourcing your customer financing using BNPL providers vs. offering it on your own with Paythen:
| Outsourcing your customer financing with BNPL | Maintaining control of your customer financing with Paythen | |
|---|---|---|
| Fees | You pay a lot – usually between 6% and 12% depending on the provider and country. In many industries, this can be a huge part of your profit margin. For longer terms beyond 8 weeks, your customers can pay a high interest rate too. | You pay only 1.4% + Stripe fees |
| Who pays for the fees | Most providers make you sign a contract stating you won’t charge extra for their services – forcing you to absorb their fees. This is inherently wrong. You work hard to build your business and brand. A payment provider shouldn’t try to dictate what you can and can’t charge your customers. | With Paythen, if it makes sense for your business, you can easily add a surcharge to cover fees or other expenses. You can charge this fee over the payment plan, or upfront. You’re in total control. |
| Country availability | Most providers are available to businesses in certain countries only. Even the biggest ones are only available if you’re based in a handful of countries. Your customers must also be based in the same country. | Available to businesses in 40+ countries with customers anywhere in the world. |
| Eligibility | You need to “apply” and get approved. Only businesses operating in certain industries are eligible. Your customers also need to apply and get approved. In some cases, they must also complete credit checks. | Get started in under one minute – no approvals needed. All businesses across all industries can use Paythen. All your customers can use Paythen with their existing credit or debit cards. |
| Cart value | Most providers restrict the total credit available to customers to between $1,000 and $1,500. If you sell a higher value product or service or if customers have other purchases on a payment plan, they can’t buy what you’re selling. | With Paythen, there are no limits to the total order value so you can sell high value items without limits. In fact, most Paythen customers sell products and services over $1,000. |
| Flexibility | None. Each provider typically has a fixed repayment period – typically between 4 and 8 payments spread over 1 to 4 months. If this doesn’t suit your business, tough luck. For many businesses selling a high value service or product, the amounts per payment can still be quite high, reducing sales. | With Paythen, you have a lot of flexibility – set billing intervals weekly, fortnightly, monthly, or anything you want. Set repayments to be over a few weeks, months or even years if you need. Collect a larger amount upfront, add surcharges, hidden fields, and more. |
| Payment currency | You can only charge in your home currency. | Offer customers payment plans in 130+ currencies. |
| Your brand | Your brand takes a backseat to their brand. All communications and user interactions are from their brand. They build their brand at your expense. | Paythen lets your brand shine while handling the back-end admin for you. Your customers see your branding – your company name, your logo and your colors. |
| Your customers | Once your customers sign up to use one of these services, they essentially become their customer. You lose any direct relationship with the customer, and over time, the providers focus heavily on driving all customers to their home page, not yours. You basically pay these providers in dollars as well as customers. | Your customers are always yours. Paythen is software designed to help you provide a seamless payment plan experience. We don’t want your customer relationships.With Paythen, your customer communications and data are always fully controlled and owned by you. |
| When you get paid | You get paid the full amount upfront, less a big chunk of fees. | You get paid as your customers pay, with automated reminders and follow-ups that handle any failed payments. |
| Types of payments | One option only – their fixed payment plan. If you want to sell other types of services or products like subscriptions, you have to mix and match payment providers. | With Paythen, in addition to payment plans, you can offer subscriptions, one time payments, and our unique Pay your way plan that lets your customers choose to pay in full or via a payment plan, for the same product. |
| Where you can accept payments | Limited. You can only use these providers in your ecommerce or physical store. | No limits. Each plan in Paythen gets its own unique payment link that works everywhere – on your website, socials, WhatsApp, text messages, and anywhere your customers are so you can use Paythen in any context. |
| Reporting | Limited reporting on just a portion of your customers. | Unified reporting in a beautiful dashboard that lets you understand what you’re owed vs. paid, and lots more. |
While we are biased, we believe setting and controlling your own customer financing, with your own branding, and critically, your own customer relationships, is a better option for many businesses. The fact that you pay significantly lower fees makes it even better. For certain types of businesses where you must get paid the full amount upfront, despite higher fees and less control, a buy now pay later provider might be more suitable. In fact, some customers even use both Paythen and a buy now pay later provider for different contexts.
The best way to see if Paythen is the right fit for you is to try it out. There’s a 14 day fee-free trial and it takes only a few minutes to get started. If you have any questions, or need a hand getting started, just reach out via the chat icon or email hello@paythen.co – we’d love to help.
