Experienced Voices

Boost Sales with Consumer Financing: A How-To for Business Owners

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Want to boost your company's sales? Consumer financing could be the key.

In this episode of Experienced Voices, our “How To” segment features Eric Daugherty of Monterey Financial Services, who breaks down the fundamentals of consumer financing for small business owners.

From understanding how payment plans influence customer decisions to setting up programs that drive growth, Eric shares practical insights on how businesses can close more sales by making purchases more accessible through flexible financing options.

Jeanne Gray: I am Jeanne Gray, publisher of American Entrepreneurship Today and host of the podcast series Experience Voices, where I talk with highly accomplished people who share the critical elements that led to their success.

I am pleased to welcome Eric Daughty of Monterey Financial Services, our guest on the how to segment of our podcast series Experience Voices. Eric takes our business listeners through the fundamentals of using consumer financing to grow their company's revenues. 

Welcome to Experienced Voices, Eric.  

Eric. It's pleasure meeting you today. I'm looking forward to learning about consumer financing and how small businesses can use it to grow. Let's start with the real basics of what is consumer financing. 

Eric Daugherty: Thanks, Jeanne for having me. Looking forward to the opportunity to be on the podcast today.

Consumer financing, essentially, it's a way for customers to break down the cost of a product or a service into manageable monthly payments instead of having to come up out of pocket for the full amount upfront for businesses. 

Basically, it's a tool that they can use to make their, products or services a little more accessible to their average consumer, especially for higher ticket purchases, a few thousand dollars potentially, or tens of thousands of dollars. 

For consumers themselves, it makes it more affordable without needing to use all of their credit card balance or any of their savings that they.

Jeanne Gray: So as any part of financing, there's an interest rate that's involved in this. So at what time or point is an interest rate revealed to the, to the customer? I. 

Eric Daugherty: The rates can vary. Just depends on what we establish as the appropriate interest rate to charge with the business.

Monterey operates under all of the, the legal capacities, so there's usy rates that are associated not to get necessarily too deep , into that rabbit hole, however conversations.

Their customer base whether that be the maximum per state potentially, or if they want to offer interest free options, what whatever they determine to be the best option for their customers is what we would set up for them. 

That could range anywhere from 0% to usury rates go upwards of 36%.

Jeanne Gray: Who is gaining the interest payment on the purchase. 

Eric Daugherty: It depends on the structure of the program that Monterey would set up with that business. We offer both consumer financing where we're purchasing the receivable, or we offer loan servicing.

Where we're managing the receivable if we purchase it, Monterey is assuming the risk of default for those customers, and if we're servicing it, then the business is retaining that ownership.

 They keep the receivables on their books. If we purchase it, we're gonna get , the interest income from that. However, if we're servicing it, we would remit principal plus interest back to the business, minus any payment processing fees or our monthly servicing fees.

Jeanne Gray: So I, I know there's a lot of different industries using consumer financing. So typically when a customer is in front of someone , offering consumer financing through their business, how quickly does the customer learn that they have been approved? They find out it's $1,800 for something, they still need a credit background check.

How quickly or how easy is that approval process to, to gain the consumer finance and let the transaction go through? 

Eric Daugherty: For Monterey it's fast usually instant or within seconds, essentially. So we have an instant decisioning system that we utilize. That's the portal that our business partners use in order to submit the applications for their customers.

We've built it out to be very user friendly. Business handles the application process for their customer.

Once approved, they can move forward with the sale.

Jeanne Gray: So let, talk about examples of consumer financing. or what do you feel is an industry that relies heavily on consumer financing that would make the listener really understand the value to growing their small business? 

Eric Daugherty: Yeah, I think that people would be surprised that essentially any business to consumer industry is offering consumer finance in one way or another.  

Typically how it works is they start by offering payment plans. A customer can't pay in full. They offer an inhouse payments.  

But like I said, they'd be very surprised to find out, , how often it is being utilized by businesses in order to maximize their sales. Industries such as, you know, healthcare, education, vocational schools, vacation ownership, timeshares services like tax resolution. Retail stores, obviously e-commerce online and anywhere you go.

There was big news recently about Walmart changing who their buy now pay later partner would be with between Affirm and Klarna. So those are different consumer financing options that, that folks have, just depending on what, what the business wants offer customer. 

Jeanne Gray: So let's just, for example, I think my experiences with.

Going to the dentist and finding out that I've, I have $2,000 for a crown or some, some procedure. And then the very first thing they say to me is, well, you can finance it. Is that a typical consumer finance situation? 

Eric Daugherty: No, sir. Certainly. So anytime that a, a customer consumer has a need or a. Where they're trying to purchase a product or a service from a business, and they can't come up with the money or prefer not to come up with the money.

, that's kind of what we're seeing. A lot of the customers are, doing today is they don't want to pay out of pocket for, you know, $1,800. Yeah.  

Financing partners where they would run an application through their system, identify , if that customer qualifies for that particular financing company's underwriting, and if so, then they, they can have the option of moving forward with financing.

Jeanne Gray: In a lot of instances, if that financing wasn't available, the client or the patient then delays or. Does not go through with the purchase and they would normally walk out the door. So that's one example of where a small business is growing their sales by not allowing potential customers to to leave.

Can you share a little bit about the other advantages that a consumer financing partnership has for helping a small business grow? 

Eric Daugherty: Yeah, exactly. To your point. The biggest one is, obviously gonna be increased sales, where they're not allowing their customers to, to leave out the door once they've already brought them in.

, that's the hardest part , is getting them in the door. And then next hardest part is. Executing on the sale. So obviously having the, opportunity to increase their revenue is number one. When you give those customers a way to say yes as opposed to having to find a way to say no when they don't wanna pay out of pocket or use, that credit card on top of that certainly helps with cash flow.

Bringing dollars in the door is certainly important for a business to, to stay afloat. Customer acquisition. Once you have a customer, they say that a repeat customer is a high percentage likelihood. You also get referral business and, and everything of that nature. And then customer satisfaction.

When a customer comes in, they, they know that they need or they want a product or service, and they have the option to get it.

Going bankrupt in a way. It's only gonna make them happier that, that they can access that product or service. There's also the reduced burden for businesses to having to manage their own payment streams particularly when, when customers are, past due or delinquent , on their payment plans.

Jeanne Gray: And I guess there's a competitive aspect to this that in some industries. If most dental offices have consumer financing types of options, that it drives almost all of them to have it 'cause they know the consumer will shop around. 

Eric Daugherty: Certainly. So one of the, big things that, I post a lot on my LinkedIn when I'm sharing information about the, industry and what we do is I talk about how not offering customer financing anymore is, a disadvantage.

Everyone's doing it. , it's not because it's the cool thing to do. It's,  average customer today doesn't have a thousand dollars in. They need to pay bills , on a monthly basis, on a weekly basis. If they have a, opportunity to afford something that they want or need by having , an affordable monthly payment of, couple hundred dollars or, $50, whatever it may be, depending on the ticket price, then it's going to provide an advantage for that business because , they can be more competitive with, with their industry within their industry.

Jeanne Gray: and just in general, what are the purchase amounts that a consumer finance company such as yours processes , or puts through? 

Eric Daugherty: Yeah, so from Monterey typically what we like to, to deal within is. More what we would refer to as higher ticket purchases. You know, maybe not a hundred dollars or a couple hundred dollars.

I know that there's apps out there that allow you to, to finance the purchase of, food. You know, spend $50 on dinner and you can space it out over a few months. You know, that's not gonna be Monterey. Typically what we're looking for is anything over, you know, in retail space, jewelry, make it work for 10,000 or more just depending on what the, the product or service is that the business is offering.

I would say kind of a sweet spot if, if you will, is probably a few thousand dollars. As I mentioned earlier, not everyone has a thousand dollars in their bank account or even a credit card that, that has that accessible balance on it. So.  

Jeanne Gray: Is there specialization in the consumer finance industry? So if a small business owner in in one type of store or online business might go to one place and find out, oh no, we don't, we don't handle that, but there's a consumer finance company somewhere down the road that probably does. So is there specialization?

Eric Daugherty: Within the consumer financing industry, there definitely is specialization. Certain businesses are more comfortable in, certain industries. I'll speak for Monterey, where we're pretty comfortable with pretty much any consumer product or service. We're willing look at it and, see if our offerings make sense for that business.  

We like to say we specialize in everything, even though it's not a particular industry necessarily. I mentioned a few earlier, education, healthcare vacation timeshare, ownership tax resolution type services vocational schools, retail stores, e-commerce. We can kind of take a, a peek at anything that, , there's a need.  

Jeanne Gray: So when I'm acting as a small business owner and considering consumer financing, what is the obvious checklist that I should have, like, you know, make three bullet points in a row of that my business would be at least qualified for consumer financing. 

Eric Daugherty: Yeah, so there has to be, we refer to it kind of as proof of concept.

The product or service that's being sold has to, have some level of perceived value for the customer base. For us , to find that to be a fit for Monterey. There has to. Sales of some sort. we're not necessarily asking for a business to be, multimillion dollar company from the start.

However, has to be some track record of, there being sales need for that product or service. We also wanna make sure that the business has, what I'd refer to as all their I's Dotted and their T's crossed. When it comes to the structure of their business, do they have some sort of agreement or invoice or terms and conditions that their customer is signing?

Do they have procedures in place to handle things like buyer's remorse potentially, you know, as. Doesn't happen, it could happen. So it's good to have procedures in place for those types of things. Having your financials in order, keeping track of everything, using the tools that are accessible to you online or, or through your own, bookkeeper, whoever that might be.

As well as having your secretary of state documents, articles of incorporation all of those types of items. 

Jeanne Gray: Well, it's a fair amount of documentation. So a startup may be a company that's been in business one, two or three years. Are they typically eligible? If, but they have to have like financials.

They might only have two years. So is there a minimum number of financials that you need to go down the road for setting up a relationship? 

Eric Daugherty: Not necessarily a minimum, , like I said, just kind of proof of concept, even if it's, you know, six months a year, kind of just depending on the, the industry that they're in.

We just wanna make sure that , there's some sort of track record of success they have everything in order to be successful long term because we look at our relationships as partnerships and successful. But that kind of starts with them. , in place is only gonna help them long term.

Yeah.  

Jeanne Gray: the company has all of that documentation in place. How quick can they gain approval from your company? I. 

Eric Daugherty: So Monterey goes through a, due diligence process, and through that we're gonna review those documents that I had mentioned.

We're going to talk to the business and identify, fit, understand what sort of offerings they. Provide to their customer base. And from there, once we have outline of a program that is going to work for them, we would submit it , for approval with our team. Ideally assuming that there's no hiccups or red flags or anything that kind of comes up out we try to get the turnaround in about two to.  

Decisioning system. We call it Oasis or otherwise a portal. We provide all the training on that for the business owner, any of their sales representatives, anyone that's gonna be involved with that process for financing. And once that's all done, they're, up and running, ready to go and start submitting for applications.

Jeanne Gray: So depending upon the industry or, for all clients, are they given a device for the consumer application to be accepted or do they point the customer to a website? how do they get the customer from Yes, I'm interested in financing to actually taking a few minutes , to apply. 

Eric Daugherty: Yeah, so that would come down to the, type of business and how they operate.

We work with businesses from e-commerce to in-person, in home to over the phone sales. So depending on how they operate. Essentially what it all boils down to is we're providing that portal oasis to the business, and typically how our partners work is they will enter in the application information on behalf of their customer.

So whether they have them on the phone or they're right standing right in front of 'em at the desk and they're trying to finalize the sale, they can enter in the application details and then submit it and get their approval. 

Jeanne Gray: so the customer could literally be in a store or on the phone and find out within moments that their purchase will be approved for the financing.

I. 

Eric Daugherty: Certainly, yeah. So our application process itself, , does take a couple minutes in order to get all of the details needed. it's similar to filling out a credit card application online as I refer to it as. So we're gonna ask you for your basic information. So your name, social security number, date of birth, address, employer information once we have that information or business.

To the application it submit, and at that point we would give that instant decision. 

Jeanne Gray: so it's a growing business. What other services are tangential to consumer financing that kick in as the small businesses growing and wants to outsource or gain some outside assistance. 

Eric Daugherty: Yeah. So, depending on what is set up initially if we only have consumer financing as the solution in place Monterey does also offer some ancillary products such as that loan servicing that I mentioned earlier.

So if, if they want to. Keep receivables on their own books. They wanna assume the risk on those. They wanna get the benefit of the interest income from those, depending on those default rates they can do. So we also do offer debt collection. So whether we have managed the. Account from the start to finish and someone goes delinquent on their, payment plan, we can place that into our collections agency give it another shot.

Or we can also offer third party collections where if that business has managed their, payment streams in house and.  

Servicing company to manage , those payments prior we'd be happy to look at those , and offer our collection agency , as an option. Our collection agency doesn't cost anything to set up or place accounts. We don't purchase bad debt. However, we do manage it. We work off on a contingency basis, so we don't earn money unless 

Jeanne Gray: Well, that's , a basket of services that a small business , would value to grow. Is it fair as we wrap up and, kind of summarize what we've discussed, that once you have set up a relationship with a small business that it goes on for years. 

Eric Daugherty: Ideally , that's what we all want.

Like I, me partnership and.  

The receivables have to perform, and we're gonna do everything in, our power, whether that be underwriting, pricing, whatever it may be to establish a program and, retain a, a program that is going to perform and be there for the long haul. We're going to work with our partners. We're gonna work with these business for success from the.

Always monitor performance, always monitor what sort of receivables we're seeing, the credit worthiness of , these customers, and kind of identify if there might be any pain points. If there are, we'll work through it with them and let them know kind of what we're seeing and what changes potentially would need to.  

for it to work for the continued future. , if we identify that that's just not going to work for either party, then you know, potentially something could happen where the relationship wouldn't continue. However, we, we wanna do everything in our power to make sure that it does. 

Jeanne Gray: Well, it was great speaking with you today, Eric, and explaining consumer financing.

I think there are a lot of small businesses that need support as they try to grow their sales, having better cash flow, being able to offer greater customer service I think is, really important for their success. So thank you again for being a guest on experienced Voices. 

Eric Daugherty: Yeah, no problem.

Thanks for having me.

Jeanne Gray: You have been listening to the podcast series, experienced Voices. To hear more and subscribe, visit american entrepreneurship.com/podcast. Where you will also find a form for listener feedback.