7 questions to ask when evaluating a financing partner

With multiple financing options in the market, it can be challenging to understand which partners are the best fit for your business.

As you begin to evaluate different types of financing options and providers, here is a list of 7 questions to ask during the discovery phase. As you get further into your search, you will want to have more in-depth questions tailored to your business, operational, and technical requirements, but these questions are a great starting point.

1. What is the opportunity with the consumer base that you serve?

You may know quite a bit about your customers, but you may not know what their financial backgrounds look like. There are data enrichment services, such as Experian Consumer View, that you can use to understand the credit profiles of your customers, which is important data to have when evaluating financing providers.

It’s just as important to understand the credit profiles of people who are interested in your products or services, but may not be shopping with you today. These are known as “hidden buyers.” One of the reasons these browsers never became buyers, may be because you don’t offer a financing solution that’s right for them.

When evaluating financing providers, ask what consumer credit profiles their solutions cover and consider how that aligns with your current and prospective customer base. For example, Koalafi’s non-prime financing solutions meet the needs of nearly 50% of U.S. consumers who are typically not eligible for primary financing options like store or private-label cards. If you don’t offer a non-prime financing option you may be missing sales opportunities from a sizable consumer segment.

2. What are your typical approval rates?

Some vendors may claim they serve a wide audience, but the proof is in the numbers. Approval rates are an important data point because it determines how many potential shoppers will actually end up with the purchasing power they need to complete the sale.

You want to look for a vendor with the sophisticated underwriting technology and analytics required to give every potential customer the highest chance of getting approved. At Koalafi, we evaluate over 5,000 data points to get a more complete picture of applicants. For non-prime consumers, credit score does not always tell the full story, which is why it is not a major decision driver in Koalafi’s underwriting models.

3. What is your customer application experience like?

Thanks to the ubiquity of native e-commerce leaders like Amazon, customers today expect a low-effort, seamless, and friction-free checkout experience - and financing is a critical part of that flow.

You want to understand a few things:

1. Can customers complete the application on their own mobile device? Nothing overwhelms a customer like a paper application or having to wait in line for a shared terminal. Customers are also nervous about sharing personal information. It's more convenient and more secure to apply on their own device. Additionally, when a customer completes the application and reviews the terms on their own device, you can be confident they had access to all of the information before they signed their contract.

2. How long is the application? A long checkout process means more abandoned carts. You'll want to understand how many steps and clicks are involved in order for your customer to apply. Ask if the provider has a pre-qualification capability. This makes it possible for your customers to get an eligibility decision earlier in the financing application, potentially using information they already entered when applying with a different provider at your business.

3. How clearly are there consumer terms presented? When customers are unsatisfied with a product or financing program, many times it is because there was incomplete information or a lack of understanding about what to expect. When evaluating partners, be sure to walk through the application and see how clearly the terms and costs are presented using language that the average consumer can easily understand.

4. Do you offer in-store and online options?

If you are an omnichannel retailer it’s important to meet customers where they are by seamlessly integrating financing into all of your retail channels.

There are different things to consider when offering financing in-store versus online. For example, sales associate training and resources are critical in-store. However, customers need more ways to self-help and self-educate online. If you’re an omnichannel retailer you will want to work with financing providers who have the depth of experience offering financing in all the channels in which you operate.

5. What additional value can you offer customers?

The questions above ensure you find a partner that will deliver strong results on the core components of a financing program. However, to create a truly exceptional experience, some providers offer completely new types of value to customers beyond the core financing program features. Additional areas of value may include virtual shopping assistants, loyalty programs, and financial wellness tools and advice. For example, at Koalafi part of our mission is to help consumers succeed. One way we do that is by reporting their payments to a major credit bureau¹. Over time, these customers have the opportunity to build credit and enjoy the benefits and access better credit can provide.

6. What marketing services are available?

Traffic generation and increased conversion are core KPIs to monitor with your financing program. To increase the program’s impact on those dimensions, it’s important to have a comprehensive marketing plan for all key touchpoints in the shopper journey. Since marketing financing products requires specialized knowledge, especially around legal and compliance considerations, it’s important to work with a partner who will provide pre-approved marketing assets and materials. Beyond core materials, your financing provider can also provide marketing services to promote your business and products to their customer base as well as deliver more tailored assets that are unique to your brand and marketing objectives.

7. How hands-on is your customer support team?

While some customers want a set-it-and-forget-it servicing experience, other customers may desire more support from their financing company. Look into the customer support hours, multi-lingual customer support, servicing channels, and net-promoter-scores. An exceptional experience with a financing provider can also reflect positively on your brand.

Contact Koalafi to learn more about our non-prime financing plans.

¹Koalafi customers may have an opportunity to build credit by making on-time payments over the entire agreement term. Koalafi reports positive and negative payment history to multiple credit bureaus.

Source for payments technology statistic: 2023 WBR Insights: Emerging Technologies in the Retail Sector Report: How New Technology Implementations are Changing