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How non-prime financing cultivates customer loyalty

June 20, 2024


3 min read

A credit score is just one point in a customer's financial journey. It reflects their current circumstances, but it shouldn’t predict their future. Forward-thinking merchants can foster customer loyalty by offering financing options that meet non-prime customers where they are today. Over time, these consumers may move up the credit spectrum as they build up their credit, and when they do, they may make additional purchases from the merchants that supported them when they needed them most.

Understanding the non-prime consumer market opportunity

Non-prime consumers often face challenges in accessing traditional financing due to less-than-ideal or non-existent credit scores. This group of consumers represents a significant market segment - 121 million consumers.1

The impact of offering non-prime financing

Offering non-prime financing opens doors for customers and drives additional sales for merchants. Non-prime financing empowers consumers by enabling them to make important purchases that might have been unattainable otherwise. In a survey of Koalafi customers, two out of three said they would not have made a purchase if there wasn't a financing option available to them, highlighting the critical role of such financing in driving sales and enhancing customer satisfaction​​.2

  • Greater access to high-quality goods: Non-prime financing options make important purchases like furniture, mattresses, tires, and auto repairs accessible to a broader audience, fostering a sense of inclusivity. 47% of US consumers have credit scores below 660, making them potential beneficiaries of non-prime financing such as lease-to-own​​.1

  • Build consumer trust with inclusive financing: Offering inclusive financing demonstrates a merchant's commitment to meeting the diverse needs of its customers. The fact that 22% of customers leave a store with a negative impression after being declined financing accentuates the critical role of accessible alternative financing methods.3

  • Higher ticket volume and conversions: With non-prime financing options, customers can purchase higher ticket items or additional items they may not have been able to otherwise, driving larger ticket volume for merchants and a better experience for customers.

Customer retention through flexible financing options

Flexible payment options such as lease-to-own ensure that a broader range of customers can engage with a merchant's offerings. Koalafi's approach to lease-to-own financing, where 70%-90% of applicants typically get approved, minimizes negative brand experiences and fosters an inclusive shopping environment that can significantly boost customer loyalty​​.

  • Growth opportunities for customers: Lease-to-own financing not only facilitates immediate purchases but may also offer customers a path to improving their credit. By making on-time payments, Koalafi customers can potentially improve their credit scores, further solidifying their loyalty to a brand that has supported their financial health​​.4

  • Drive repeat customer purchases: With lease-to-own financing, customers are typically approved for more than they plan to spend at once. Koalafi offers incentives to these customers to open a new lease with their available purchasing power, giving merchants additional sales opportunities by encouraging these customers to return and spend more. We’ve seen the impact of repeat customers, as over 70% of 2nd leases at Koalafi are with the previous merchant.5

Non-prime financing, particularly through lease-to-own options, presents a valuable opportunity for merchants to expand their customer base, enhance customer loyalty, and drive repeat business. By providing flexible, inclusive financing solutions, merchants can create positive shopping experiences that resonate with a broad spectrum of consumers.

1 “The Consumer Credit Card Market.” Consumer Financial Protection Bureau, 2021

2 Koalafi customer survey in November 2022. Question: Think about the last time you financed a purchase. Would you still have bought the item if financing wasn’t available?

3 Koalafi customer survey in November 2022. Question: If you were declined for financing in a store, how would your opinion of that store change?

4 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.

5 Koalafi customer survey

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Koalafi offers Lease-To-Own and Lending solutions. Loans issued by The Bank of Missouri, serviced by Koalafi