December 5, 2022

small business advice

Financing Your Customers

Jerry Osteryoung | 3/2/2009

Let me remind you that credit is the lifeblood of business, the lifeblood of prices and jobs.
— Herbert Hoover, Address at Des Moines, Iowa, October 4, 1932

So many businesses and individuals are having financial problems, and unfortunately, these problems are going to be around for almost one more year. We must learn to adapt to these difficult times even if it means changing the way we have always done business.

While you might be strapped for cash, your customers are even more so. As a result, they are just not spending money. Many are not spending money on needed items and services in an effort to conserve cash, and many others are not spending for fear that things are going to get much worse. Bottom line is that you have to develop a marketing strategy that addresses all of your customers’ problems and fears.

One approach to help market your business in these difficult times is to allow your customers to pay over time. One firm we are working with had a customer that needed service on their computers. The services were needed immediately or the quality of customer care would tumble precipitously, but the customer just could not afford the repairs. In response, the computer service company offered to do the repairs at a very low price, but the business just did not feel comfortable letting its cash-flow deteriorate any further.

Knowing that delaying these services would put the ailing customer at risk as well as potentially lose a very good client, the firm came up with a payment plan option. The initial down payment enabled the firm to recover all of its direct expenses, and the remainder was spread over six months. The customer was still unsure about the expenses, but they finally made the decision to have the repairs done.

While the computer service firm had to wait a tad to get their funds, the payment plan option allowed them to help a customer in need and make a sale. None of this would have taken place had the firm been unwilling to offer credit terms that worked with its customer.

Assuming that you have the cash or credit to provide financing for some of your customers, this is an avenue that you must consider especially into today’s economy. However, there are several points of caution. First, with the extension of any credit, there needs to be a legal binding contract that memorializes the agreement. Second, you need to look into the credit worthiness of the customer. Extending credit to a company that is about to file for bankruptcy is not good business, so you will need to do a little bit of homework. Finally, the terms of any credit extension should be less than one year to ensure that you minimize your firm’s risk.

Now go out and see if the idea of extending credit to your customers makes sense for you and your business. This is another vehicle to help you make sales in these difficult times.

You can do it!

Jerry Osteryoung is the Director of Outreach of the Jim Moran Institute for Global Entrepreneurship in the College of Business at Florida State University, the Jim Moran Professor of Entrepreneurship; and Professor of Finance. He was the founding Executive Director of the Jim Moran Institute and served in that position from 1995 through 2008. He can be reached by e-mail at or by phone at 850-644-3372.

Tags: Florida Small Business

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