Retailer Finance

Retailer financing or dealer financing is a credit facility to spread the cost of purchases into affordable payments. It makes shopping highly flexible, especially during times of financial stress like the one induced by the COVID-19 pandemic.

The retailer finance option is particularly beneficial during high-value purchases, allowing buyers to defer the payment or spread it out over an extended period. This mode of payment is flexible, and dealers offer different repayment options. While it is a buyer-centric financing option, it is also beneficial for sellers.

Read on to learn more about retailer financing and how it benefits customers and retailers.

What Is Retailer Financing?

In simple terms, retailer financing refers to a type of short-term unsecured credit that retail businesses offer their customers. This is a typical recourse taken to manage inventory and boost sales and is offered to buyers with a good credit rating.

Sellers offer this mode of financing to buyers at the point of sale. Customers get a credit on their purchases. They can then defer payment or spread it out, making their shopping experience simpler, quicker, and more convenient.

The seller, in turn, sells the credit to a financing institution that provides retailer financing for business as a service. These institutes can either provide credit through the retailer or set up separate payment options. Financers can take various measures to secure payment.

Retailer finance has traditionally been common in high-value purchases like automobiles. Today, it is also prevalent in other segments of the retail industry. Retailer financing allows retailers to arrange finances for their internal requirements without affecting overall business value. Internal requirements can range from effects of fluctuation in demand and supply on the inventory to salary payment, staff training, etc.

Retail financing can take various forms and may or may not include added interest.

Retailer Financing Options

There is no one-size-fits-all approach for customer convenience. Nevertheless, there are multiple variants when it comes to retailer payment options. Various types of payment modes include:


EMI refers to the type of financing where customers have to pay the total amount over an extended period of time with additional interest. This is most similar to a traditional loan, but a retailer offers it instead of a traditional financing institute like a bank.

No Cost EMI

As the name suggests, this is similar to EMI but with one key difference: no interest is added to the product's price. Instead, this financing method simply divides up the total price into smaller amounts payable over a period of time. Also known as "0% financing", this method allows customers to purchase a product without paying any extra amount.

Bullet Loans

A bullet loan is another method of retailer financing especially popular in small value purchases. In this type of financing, the buyer can pay the entire amount of the product lump sum later. This is common when customers need to buy but lack sufficient funding. If they can guarantee the payment later, retailers usually provide credit in this form. Institutions usually charge an additional interest amount in case of such financing.

Buy Now Pay Later

Buy Now Pay Later or BNPL has quickly become one of the most popular modes of financing in the online retail space. It has traditionally been the most popular form of retailer financing on a small scale and was common while purchasing essentials, medicines, etc. In simple terms, BNPL allows customers to buy a product and pay for it later. As a result, there are usually no additional interests charged on the product price.

Funding agencies provide this retailer solution to benefit both the buyer and the seller. Buyers get the convenience of purchasing even during low funds, while sellers get their payment up front with no delay. Buy Now Pay Later facilities by institutions like KredX allows retailers to improve sales and attract new customers, while allowing for a great shopping experience.

Retailer Financing Benefits For Businesses

If a business can find the right channel partner, it can enjoy the following benefits of channel financing:

Expand Customer Base

Retailer financing is an attractive proposition for customers. Therefore, they will prefer to purchase from retailers who provide this convenience and trust. They are also likely to spread the word about such sellers themselves. Businesses can thus attract more customers with the help of retailer finance options.

Enhance Cash Flow

An unobstructed cash flow is essential for all retailers to meet their business obligations and growth objectives. Retailer financing allows sellers to acquire cash via financing institutions immediately for a product sold, even while extending credit to the customer. This ensures uninterrupted cash flow for the business.

Increase Sales

One of the most visible benefits of retailer financing is increased product sales. When customers get the credit option for purchase, they naturally tend to purchase more at one go or buy higher value items. This rise in sales also helps clear the inventory and free up space for stocking.

Business Expansion

Retailer financing allows sellers to increase sales, clear their inventory, replenish stocks faster, and access working capital even while providing credit. All this improves operational management and increases business growth and expansion scope.

Greater Customer Loyalty

Retailers give customers an impression of trust by extending credit via retailer financing. Moreover, the ease of making payments at their convenience makes this an attractive proposition for customers. Customers reward this trust and convenience with loyalty toward the seller. Additionally, the involvement of reputed financial institutions also makes retailers trustworthy to their customers, further increasing their loyalty.

Retailer financing thus offers several benefits to buyers as well as sellers. Businesses can extend credit to customers without affecting their working capital. It also helps them clear the inventory faster, increase sales, improve customer loyalty, and expand the business. Moreover, the responsibility of payment collection lies with the financing institution, making it more attractive for a retailer. Retailer finance is thus a lucrative financing option for customers and secure funding for retailers.


Retailer financing allows uninterrupted cash flow and does not impact the working capital significantly. It also increases sales and improves customer loyalty. These benefits are invaluable for startups and small businesses to develop and grow their business.

While shopping online, it is common for customers to add products to their carts and not purchase them. Retailer financing allows them to directly purchase products right when they add these to the cart. They can then pay for their shopping later. Early purchase means early delivery without having to wait for funds.

Retailer financing options like Buy Now Pay Later and No-Cost EMI are common offers in almost all major online retailers. Buyers get the option to avail this mode of financing right during checkout, making it a convenient and hassle-free shopping experience.

Financial institutions usually charge retailers a nominal fee to provide retailer finance benefits. This charge is usually a percentage of each transaction involving the financing.