In-House Financing Options for Customers

Technological advancements and business strategies have paved the way for countless possibilities for retail businesses that were previously out of reach. With the lending industry undergoing significant changes, recent macroeconomic changes, such as increased interest rates, have led merchants to consider client monetization. The appeal of lending, mainly through in-house customer financing, has grown under these circumstances. The traditional approach of seeking funding from a bank is no longer the norm. In today’s landscape, lending is becoming more flexible, and finance is becoming more comprehensive. The latest trend is to provide in-house financing solutions, allowing small businesses to offer financing options directly to their customers. The CompassWay consumer lending platform allows vendors to swiftly evaluate clients and make credit decisions from anywhere in the world. This platform utilizes advanced algorithms and analytics to automate the loan origination process, from funding applications for any loan product.

This approach benefits the business and provides customers with more payment options, making it easier for them to purchase the products or services they desire.

This article presents a comprehensive guide on customer financing in retail, including how merchants can provide in-house financing options, the benefits of offering customer financing, and how to choose a dependable software solution to handle all your in-house financing requirements.

What is In-House Financing?

In-house financing, also known as seller financing or owner financing, is a financing arrangement in which a seller of a product or service provides credit to the buyer. Instead of the buyer obtaining a loan from a traditional lender like a bank or credit union, the seller finances the purchase directly.

Here’s how in-house financing typically works:

  1. Agreement: The buyer and seller agree on the terms of the sale, including the purchase price, interest rate (if applicable), down payment, and repayment schedule.
  2. Down Payment: The buyer often makes a down payment upfront to secure the purchase. This down payment is usually a percentage of the total purchase price.
  3. Payment Schedule: The seller and buyer establish a payment schedule for the remaining balance. Payments can be made monthly over a set period, depending on the agreement.
  4. Interest: Sometimes, the seller may charge interest on the outstanding balance, arranging a traditional loan. The interest rate is typically negotiable between the buyer and seller.
  5. Ownership: While the buyer makes payments, they may possess and use the financed item (e.g., a house. furniture, or a car). However, the seller retains legal ownership until the buyer completes the payments.

Title Transfer: Once the buyer has paid off the entire purchase price, including any interest, the seller transfers ownership to the buyer. For example, in real estate, the deed to the property is transferred to the buyer.

Who Benefits Most from the In-House Customer Financing Model?

Retailers are increasingly turning to digital lending as it reduces the chance of a broken sales funnel, boosting the likelihood of a transaction. It is often more accessible and stable than expensive and complicated.

Third-party financing of their customers.

Offering customer financing is also a great way to improve your customer’s buying experience, and it can benefit your business in many ways.

Here are 5businesses that are set to benefit from in-house customer financing in the next five years:

Many automotive dealerships pride themselves on offering financing options to their valued customers. This valuable service allows potential buyers to complete an application for financing a brand-new or used vehicle while at the dealership. With same-day approval, these customers can quickly and easily secure financing for their dream car. By providing these attractive financing options, automotive dealerships can effectively boost their sales volume without taking additional risks. It is a win-win situation for everyone involved.

Did you know that offering in-house financing can benefit your manufacturing business? By providing a financing option for your customers, you can make it easier for them to purchase your products and services. With in-house financing, they can spread the cost of their purchase over time, making it more affordable and less of a burden. This option can also benefit your business by reducing the time it takes to get paid for products or services, improving cash flow and working capital needs, and allowing you to offer special financing terms unavailable through banks or other lenders.

Jewelry stores have a promising opportunity to benefit from in-house customer financing over the next five years. This financing option allows customers to buy fine jewelry over time without interest charges. This helps customers get the pieces they desire, fosters loyalty, and encourages them to return to the store. Furthermore, in-house financing can enable jewelry stores to expand their reach to new markets. By offering credit to new customers, stores can welcome a fresh group of individuals who previously needed help to afford their products.

In today’s world, the demand for medical equipment is increasing rapidly, and financing it is becoming a significant challenge. You may wish to avoid bearing the financial burden alone as a business. Instead, you can offer your customers an appealing financing option that enables them to pay for the equipment over an extended period.

Some furniture stores offer financing options for their customers. This is becoming more common as furniture can be costly, and not everyone can pay for it all at once. In-house consumer financing allows customers to divide the cost of their furnishings into manageable monthly payments without going through a bank or lender. Additionally, there is no need for a credit check as the customer is dealing directly with the furniture store. This arrangement benefits the customer and the store as they can purchase what they want without hassle and sell more.

What are the Benefits of Providing In-House Financing to Your Business Customers?

Providing customer financing options to clients is highly advantageous for vendors in various ways. As a business owner, your primary objective is to increase revenue, retain loyal customers, and run a profitable business. By offering this service, vendors can attract customers who may not yet have the means to purchase otherwise. This could significantly improve customer shopping experience, as they would be flexible to pay for their purchases in installments rather than making a lump sum payment upfront.  Additionally, it helps you win repeat business, increasing the likelihood of customers returning to make future purchases because they will appreciate your willingness to offer affordable and flexible in-house financing solutions. They may even freely recommend your business to others through word-of-mouth referrals to friends and family.

Ultimately, offering financing options can be a win-win situation for vendors and customers.

Steps to Set Up In-House Financing Using a Commercial Lending System

Implementing in-house financing with business lending software can be a powerful tool for businesses offering financing solutions to their customers while streamlining their operations. Here are the steps to set up in-house financing using commercial lending software:

Choose the Right Lending Software

When searching for a commercial lending platform that meets your business needs to offer financing to your customer, choose one that offers end-to-end lending software, including loan origination, underwriting, repayment tracking, and reporting.  A helpful approach to minimize the perceived financial risk when buying software is to take advantage of commercial lending free trial periods.

CompassWay offers a 14-day free trial that lets potential customers try the software themselves. This enables them to determine if the software is suitable for their requirements, easy to use, and meets their expectations. This experiential approach is often more persuasive than merely reading promotional materials or viewing demonstrations.

Omnichannel Submission

The consumer lending platform provides flexibility for customers when they apply for in-house financing with multiple channels, including online, in-branch, or call centers. Additionally, customers can save and resume their applications from any medium and use self-service portals to upload documents and track their application’s progress. This omnichannel approach improves the customer experience by accommodating their preferred application method and allowing them to transition smoothly between channels. It also reduces customer dropouts, speeds up onboarding, and ensures digital identity verification.

Loan Origination System

With consumer lending software, you can issue a loan quickly without any paperwork. This results in faster approvals and loan releases, reducing the time it takes to get a yes from weeks to minutes. CompassWay is an all-in-one lending platform that automates the entire loan origination process, from application to disbursement, providing an exceptional experience for your clients and team. It works for any loan product and employs advanced algorithms and analytics to score clients and make automated credit decisions quickly. You can access it from anywhere, at any time.

Automated Credit Decision System 

To accurately determine a borrower’s creditworthiness, it’s essential to have access to real-time insights based on their credit scores. The business lending software ensures that all data and documents are validated by synchronizing information from various sources such as KYC registries, credit bureaus, and banks.  Credit decision engine rules and underwriting algorithms are used to evaluate the loan application and determine whether it meets risk checks and balances.

A customizable scorecard that considers recent cash flow information, total debt level, and repayment history, among other factors, is critical. Using internal and external data sources in a credit decision model can significantly impact the quality of credit engine decisions. Incorporating objective financial information and other risk-related factors has increased consistency throughout the lending underwriting process.

Loan Servicing

One of the key responsibilities of business lending software is managing and tracking loan servicing activities. This includes closely monitoring payment schedules, ensuring customer information is always up-to-date, and handling any necessary loan term modifications. Set up payment processing within the commercial lending software to manage customer payments, including accepting payments online or through other methods like checks or cash. Ensure the software can automatically calculate interest and principal payments.

Automated Communication 

The commercial lending system should help you get return customers. The best commercial lending software displays personalized loan recommendations to existing borrowers to expand the possibilities of making them repeat customers.

Notifications, SMS, email, or personalized nudges — provide your marketing teams with the tools they need to create targeted campaigns and outreach that engage customers and members, resulting in long-term loyalty and stickiness.

Reporting and Analytics

Sophisticated reporting capabilities in commercial lending software enable real-time business performance monitoring, providing valuable insights into lending operations. This advanced functionality allows for the efficient and accurate tracking of key financial metrics, which can be used to inform strategic decision-making and optimize lending practices. With these capabilities, businesses can gain a competitive edge by staying ahead of market trends and identifying opportunities for growth and expansion.


The ability to bridge the gap between closing and losing sales is essential for the success of retail businesses. Consumer lending can provide a reliable financing solution with numerous benefits for your retail business. If you are a retailer starting or looking to enhance your existing business, offering in-house financing to customers is an ideal way to secure repeat business, increase sales, and improve your overall return on investment.

CompassWay is a reliable commercial lending software that offers an all–in–one loan management system to start an in-house financing business. Try a 14-day free trial period.