Offering Finance to Customers: The Ultimate B2B Guide (2025)

Could Your Business Offer Customer Finance in 2025?

Who Should Read This Guide

For UK businesses considering retail finance as a way to boost sales, expand their customer base, or improve cash flow, this guide is essential reading. Whether you operate in retail, services, home improvement, healthcare, or technology, understanding how to offer finance to customers can be transformative. Finance options aren’t limited to big brands; small and medium enterprises can also harness these tools for growth. If you have ever lost a sale because a customer couldn’t pay upfront, this guide is for you.

What is Customer Finance?

Customer finance (commonly called point-of-sale finance or retail finance) is a method that allows your customers to spread the cost of purchases over time. Instead of paying in one lump sum, buyers enter into a credit agreement, repaying the total through manageable monthly payments. As a business, you receive the full payment upfront from a finance provider, who then collects repayments from the customer. This model has surged in popularity, especially for purchases above £250, and is increasingly seen in both online and in-store environments.

The Value of Offering Finance

Enabling customers to pay via finance is about more than simply offering another payment method. It’s a powerful tool for increasing average transaction values and winning new business. Many buyers hesitate when faced with a significant upfront cost, so giving the option to spread payments can remove this barrier, often converting browsers into buyers. Additionally, businesses often receive the entire amount upfront from lenders, thereby reducing cash flow concerns. In a climate where cost-of-living pressures are real, offering finance builds goodwill by supporting accessible, affordable purchasing.

Key benefits at a glance:

• Increased sales and conversion rates
• Larger average order sizes
• Improved customer loyalty and satisfaction
• Upfront payment to the business, reducing cash flow risk

How Customer Finance Works (In Plain English)

The process of offering finance to customers is designed to be straightforward both for businesses and for end-buyers. Here’s what’s involved:

1. Partnering with a Retail Finance Broker or Provider
Your business will work with a finance broker (such as Kandoo) or directly with a lender. The broker connects you to regulated lenders, helping to navigate compliance and paperwork.

2. Integrating Finance Options at Point of Sale
Once you’re onboard, finance options are made available to your customers—either online, through your sales staff, or within your checkout system. Customers see the choice to pay via finance as they shop.

3. Customer Application
When a customer chooses finance, they complete a simple finance application (either online or in person). The process typically involves basic personal and financial information, and the application is submitted to the lender in real time.

4. Credit Assessment
The lender reviews the customer’s application, conducting checks to determine eligibility and risk. This review is commonly automated and can deliver a decision within minutes.

5. Approval and Payment
If approved, the customer signs a credit agreement. The lender pays your business the full purchase price, usually within a few days.

6. Repayment by Customer
Your customer repays the lender in agreed monthly installments, including any interest or fees according to the deal.

7. Aftercare and Compliance
The finance provider typically handles collections and account management. Your business is responsible for ongoing compliance with UK financial regulations, including transparency and fair marketing.

This approach can be tailored to suit a variety of industries, basket sizes, and customer profiles—making it a flexible option for modern commerce.

What to Know Before Applying to Offer Finance

Before you dive in, understanding the following will help you make an informed choice:

• Regulatory Responsibilities: You will likely need authorisation from the Financial Conduct Authority (FCA). This means meeting standards for treating customers fairly, advertising finance responsibly, and ongoing compliance.
• Eligibility Criteria: Lenders and brokers have requirements, including minimum turnover, trading history, and sometimes sector-specific conditions.
• Costs and Fees: While your firm receives the sale value upfront, you may pay a fee to the broker or lender. Review contracts carefully for commission structures and potential hidden costs.
• System Integration: Check what technical or administrative changes are needed to implement finance at checkout or in your sales process.
• Customer Experience: Evaluate how simple or complicated the application is for your customers. A cumbersome process can deter buyers.

Planning and preparation are essential. Most finance brokers offer training, support, and template documents to smooth onboarding and ensure compliance.

Demystifying the Jargon: Key Terms Explained

When dealing with retail finance, you’ll encounter industry-specific terminology. Here are essential definitions:

• APR (Annual Percentage Rate): The total yearly cost of borrowing, expressed as a percentage.
• Point-of-Sale (POS) Finance: Credit offered at the time and place of purchase, whether online or offline.
• Broker: An intermediary, like Kandoo, that matches your business to regulated finance providers.
• Soft Search: A credit check that doesn’t affect the applicant’s credit score.
• Underwriting: The process by which lenders assess risk and determine eligibility.

Understanding these terms empowers your business to communicate clearly—and helps build trust with your customers.

Weighing Up the Pros and Cons

Pros: - Boosts sales by enabling higher-value purchases

• Reduces the incidence of lost sales due to affordability
• Upfront payments from the lender safeguard your cash flow
• Enhances competitiveness compared to businesses not offering finance

Cons:

• Requires commitment to regulatory compliance and ongoing training
• Comes with costs for setup and ongoing commissions
• Customer default may impact commercial relationships with finance providers
• Not suitable for all products or sectors—some exclusions apply

Other Payment Options Worth Considering

Customer finance isn’t the only way to support buyers. Consider these alternatives:

• Layaway Schemes: Customers pay for goods in installments before taking them home. No credit agreements, but slower cash flow.
• Credit Card Payments: Useful for many buyers, but often come with merchant fees and can limit transaction values.
• Buy Now, Pay Later (BNPL): Short-term, interest-free credit often managed by fintech companies. Popular for lower-value transactions.
• Business-Initiated Instalment Plans: In-house split payments without involving a lender. These can add complexity and cash flow risk for the business, but avoid lender fees.

It’s worth weighing these methods alongside traditional finance to find the best fit for your customers and balance sheet.

Frequently Asked Questions

How long does it take to set up retail finance for my business?
Setup typically takes between a few days and several weeks, depending on FCA approval timelines, system integration complexity, and training needs. Brokers can fast-track onboarding where possible.

What minimum order values are usually required?
Most providers require a minimum finance amount per transaction—often £250 or more. This ensures the value covers lending costs.

Will my business be liable if a customer defaults?
Generally, no. Most finance agreements provide the business with upfront payment, and the lender assumes the risk of customer default. However, persistently high default rates could impact your future eligibility or commission rates.

Does offering finance affect customer credit scores?
Customers submitting applications will undergo credit checks. Declined applications or unsuccessful soft searches typically don’t impact scores, but accepted credit agreements may affect them as with any loan.

Do I need IT expertise to offer retail finance?
Many finance platforms are plug-and-play for websites or require only basic integration for in-person sales. Providers usually supply guides, templates, and support.

Ready to Offer Finance? Start With the Experts

Offering finance can transform your business and customer experience. To explore tailored solutions and receive expert guidance, contact a retail finance broker such as Kandoo today. The right partner will walk you through every step, ensuring compliance and maximising your sales opportunities.