Installment Contract Financing
Receivables Into Immediate Working Capital Financing
The retail installment contract commonly found in industries
such as leisure services, educational products and services, and
medical devices and services, can easily be converted into a lump sump
payment, giving your business a badly needed shot in the arm or a
source of working capital financing.
For centuries, businesses have use receivables factoring to
stabilize cash flow and finance operations by selling their accounts
but until recently, companies with consumer installment contract sales
were not able to utilize this powerful financial tool.
there are factoring companies that specialize in installment contract financing, or the purchase of retail
installment contracts from businesses that offer terms to their
customers. And like traditional factoring companies, they offer
direct-to-consumer businesses the same value-added collections and
accounting services enjoyed by business-to-business firms,
eliminating costly overhead and the headaches associated with
managing the contracts.
As with the traditional invoice-based account receivable
factoring, installment contract financing gives you these important benefits:
- Fast money deposited directly in your bank account to
- Stable working capital financing
- A tool to finance expansion without incurring debt.
How Does Installment Contract Financing Work?
business owners know that offering payment terms to potential
customers can dramatically increase sales. However, forgoing
lump sum payment for the product or service you offer in exchange for
accepting a series of small payments over time presents significant
financial and administrative challenges to any company —
that often stand in the way of companies reaching their full potential.
Installment contract financing blasts away these barriers,
easy to offer customers terms on larger purchases. The competitive
advantages can be enormous if terms are not generally available for
your product or service in your market area.
Business Financing Tip
Are you are already offering terms to your customers?
Why not talk to a contract buyer to find out if your
company can take advantage of their collections and accounting services
to make your life a little easier and your business a lot
Once you have established a relationship with a contract buyer, the
process of selling your installment contracts is quite simple:
- Your company negotiates a sale of a product or service with
optimize the sale of the contract, you submit your customer’s basic
income and credit information to the contract buyer for approval and
- Your company enters into an installment contract with its
the contract is signed, it is immediately assigned to your contract
buyer, who then transmits the funding proceeds directly to the client
company’s bank account
Funding normally occurs once the
contract buyer has received the original signed contract or can confirm
electronically that the contract has been signed and that the product
or service has been delivered to the customer.
For most clients, the
funds are available within
3 to 5 business days of contract signing.
What Types Of Businesses Are Eligible?
are many types of businesses that can sell installment contracts. Most
contract buyers will be open to considering just about any product or
service that lends itself to an installment sale.
a list of industries that generally fall into the parameters for
installment contract sales. In fact, the possibilities are limitless,
so if you don't see your company's product or service type below,
discuss your specific situation with a contract buyer. Chances are, if
it makes sense, you're in!
Educational Products & Services
& Membership Contracts
- College Funding & Planning Services
- Alternative Learning Instruction
- Seminars & Business Opportunity Programs
- Vocational & Trade Schools, such as Computer
Certifications, Medical Billing Schools, Truck Driving Schools,
- Timeshare Programs
- Vacation Club Memberships
- Campground Memberships
- Dating Services
- Health Club Memberships
- Golf Club Memberships
- Martial Arts
- Discount Buyers Clubs
Household Products & Services
- Woodworking Hobby Tool Sales
- Bulk Home Food Sales
- Vacuum Sales
- Musical Instrument Sales
- Furniture & Jewelry Sales
- Fitness Equipment
Infomercial & Direct Response
- “Flex” Pay Plans, i.e. "4 Easy Payments!”
- Television Infomercial, Print Ads, Internet Ads…
Medical Devices & Services
- Dental Procedures
- Body Scanning
- Elective Surgeries
- Laser Hair Treatment
- Emergency Life Saving Devices
is the case with receivables factoring, companies considering the sale
of their consumer contracts should understand that the contracts will
be purchased at a discount and that the contract buyer will hold back a
reserve to offset defaulted contracts. The discount and reserve amount
are both dependent on the credit quality of the end
customer; so, the
better the customers’ credit quality, the higher the price paid for the
contract the less held back in reserve.
One of the first things
any business needs to consider is whether its profit margin on sales is
high enough to absorb the discount and reserve hold back, while
maintaining an acceptable operational cash flow. Ideally, a company
that sells its contracts will have a minimum profit margin of 40%, but
the higher the better.
for a well-established and flexible contract buyer, preferably one who
can work with all types of consumer credit and one that has the ability
to perform instant, on-line approvals. A good contract buyer will work
with new, start up companies as well as niche industries that fall
outside the norm. Finally, be aware that some larger funding sources
will require a guaranteed volume requirement that many new businesses
Business financing can be
a daunting challenge
in today's tough credit climate.
Installment contract financing offers businesses many benefits, not the
least of which is the promise of
a relatively easy way to increase sales and bring more cash in the door
to move your company toward its full potential.
Find out how
installment contract financing
can help your company prosper today!