How To Use Square Installments To Offer “Buy Now, Pay Later” Options For Your Customers
Due to the ongoing situation of the COVID-19 pandemic, Square has temporarily suspended the Square Installments program. We will update this space when Square reactivates the program.
As a small business owner, the option to offer financing via Square Installments to your customers is all about increasing sales and the overall purchase price. Your shoppers will like it because financing can make large-ticket items easier to purchase with predictable monthly payments spread out over time, which helps them buy what they want. Let’s take a look at why Square Installments can be an excellent way to offer financing options to your customers, what’s involved in getting started, and how you can make the best of it for your business to improve sales!
Table of Contents
- Why You Should Offer “Buy Now, Pay Later” Financing To Your Customers
- How Does Square Installments Financing Work?
- How Much Does Square Installments Cost?
- How To Market Square Installments To Your Customers
- Should You Use Square Installments?
Why You Should Offer “Buy Now, Pay Later” Financing To Your Customers
Before we get into the how of installment payments, let’s start with the why. As a business owner or manager, you’re probably always looking for ways to improve sales and stand out from your competitors. When customers get in the door of your shop or start to talk about pricing, using tools such as financing can help your small business in a few different ways.
1) Ease Sticker Shock, So They Buy From You
For your customer who is making a decision about a larger purchase, the option of splitting payments up in installments vs. using a higher-interest revolving line of credit or paying outright may be more enticing. Simply put, installment payments provide another option for them and can ease sticker shock to help you close the sale.
2) Preapproval For Short-Term Retainers & Invoices Gets You Paid Faster
Anyone who has a business model based on a retainer or short-term payment agreement knows that sometimes when the payment comes due, you’re met with crickets — possibly because the person you invoiced has bad credit or is in financial trouble. These issues can be virtually nonexistent when Square Installments takes on the financial risk. Offering Square Installments with an invoice helps you solidify the deal and ensure your customer pays you.
3) Relieve In-House Administration & Bill Collections
Of course, you could offer in-house financing, but along with that comes more paperwork, financial risk, and more hours in debt collection. By prescreening and prequalifying customers through Square Installments, you know exactly what your customer can really afford. Once your customer is approved, your role is finished. Square pays you right away and collects the funds from your customer moving forward. Any questions your customer has about billing is deferred to Square from that point on. No more bill collection, billing customer service, or in-house paperwork is needed on your end at all!
How Does Square Installments Financing Work?
Financing can make things easier on your customer, but it doesn’t have to mean that you wait for the cash like you would with in-house financing. When you offer to finance through Square Installments, you sell your product or service; then, the payment is settled directly between the lender and your customer. Square pays you in full at the time of purchase.
Financing through Square Installments is only open to Square customers, so you’ll need to set up a free Square account if you haven’t already. The signup process is surprisingly short, can be done online, and doesn’t require a credit check for you, which is a plus.
Assuming everything is a go and you are approved (more on eligibility in an upcoming section), the process is very simple for you and your customers. If their purchase price is between $150 and $10,000, you can offer Square Installments as a payment plan option. Let’s explore each avenue that you can go through with Square Installments.
Square Installments VIA POS
Customers fill out a short application from their own device via a unique web link that Square creates for your business (once you’re approved to offer Square Installments.) Here is what the process looks like for your customer:
Step 1: After sending your customer a link, they go through the following screens on their device. You just wait for them to finish and then usually the approval amount is immediate, so they’ll know how much they can spend at your shop.
Step 2: Your customer sees what amount they are prequalified for and can then adjust the amount and view payment plans.
Step 3: Your customer can pick a payment plan on their device.
Step 4: Your customer has a chance to review all of the terms, the cost of financing, and the final price.
Step 5: After reviewing the terms and having access to the disclosures, your customer receives a digital card to spend with you!
When your customer makes a purchase, and you process it at your POS, you’ll pay a 3.5% processing fee, and that’s it.
Square Installments VIA Virtual Terminal
If you aren’t physically in the store with your shopper, the process is the same as above for your customer. You’ll share the Square Installments link with them, and they’ll fill out the application from their smartphone. In almost all scenarios, customer approval happens in real-time, right when they’re ready to purchase at your shop.
If approved, they can accept one of the financing options and will receive a one-time-use number for a digital card they use to pay you for their purchase. The number is valid for seven days, and your customer can only redeem it at your business. When your customer is ready to buy, they’ll share the digital card number given to them, and you will key that number directly into your virtual terminal at your Square Dashboard. The cost for processing is the same as your Square POS — 3.5% of the purchase price.
And, of course, Square pays you in full for the amount at the time you process the approved application.
Square Installments VIA Invoices
Square Invoices allows you to send your customers the Square Installment option as well. After you are approved to offer Square Installments, the option for installment payments will appear on your invoice automatically. Once your customers receive your invoice, the process is similar to the one above — they fill out an online application, can pick a plan, and once approved, you get paid upfront and in full. The cost of processing a Square Installments payment is 2.9%
How Do I Know If I’m Eligible For Square Payments?
Square Installments is only available to select types of businesses, and it is determined on a case-by-case basis by the following factors:
- Account activity
- Processing history
- Business type
You can search for and access Square Installments at your dashboard to see if your business is eligible. Some types of businesses are automatically out of the running for Square Installments. Here is a list of businesses and/or services that are not eligible right out of the gate:
- Legal services
- Credit repair
- Bail bonds
- Psychic services
- Live animal sales
- Insurance companies
- Auto or motorcycle sales
- Alcohol, tobacco, or cigarettes
- Plastic surgery
- Political organizations
- Nonprofit organizations
- Collections agencies
- Wholesale transactions
- Most B2B sales
- Travel purchases with hotel and/or airline tickets
How Much Does Square Installments Cost?
The processing rate varies slightly from a regular Square transaction, and here’s how it breaks down once you run the final sale with your customer’s digital card:
- Point Of Sale: 3.5% of the purchase price
- Virtual Terminal: 3.5% of the purchase price
- Invoices: 2.9% + $0.30
The good news is that there are no recurring monthly usage fees or long-term commitments with Square Installments. You can cancel the service any time you want with no fees or contracts for your business to worry about.
For a customer who is considering using Square Installments to pay for a purchase, the annual percentage rate will vary, depending on a few different factors. However, every customer will have options when it comes to repaying the loan. Square makes things straightforward and easy to understand for the borrower, with ease of use in mind.
How To Market Square Installments To Your Customers
If you’re approved to offer Square Installments, you’ll get a few tools to help you spread the word and encourage your customers to prequalify. If you have an eCommerce site, Square lets you add a banner advertising the Square Installments option. You also get some print materials you can use in your store, if applicable.
You can also educate your sales and floor teams on Square Installments, specifically that customers can be preapproved without dinging their credit. Customers won’t get a hard credit check until they approve the payment plan they want.
There’s one more way you can spread the word: email marketing through Square Marketing. Square offers a few free templates you can send to your clients and include your own messaging on Square Installments being your new payment option.
Should You Use Square Installments?
The main benefit of Square Installments is that customers can pay over time, and that can make it easier and more likely for them to buy from you. Whether to break up payments for a big purchase that a customer otherwise couldn’t afford or simply to offer a convenient option other than cash or checks, financing through Square Installments can be a valuable tool for your sales team to leverage.
When the average business owner thinks about customer financing, one of the biggest concerns is that the customer gets possession of the product or service without paying in full. While that may be a concern if you offer in-store financing and manage it yourself, in this case, Square takes on the financial risk entirely. You get paid right away, and Square manages the installments.
However, keep in mind that Square Installments is only applicable for purchases between $150 and $10,000 — so businesses that deal with higher ticket products or services will need to split the ticket or look for other financing options entirely.
For any business owner, the benefits and conveniences should outweigh the cost of Square Installments’ processing per sale. Because you don’t need to sign any long-term contracts to use Square Installments, it might be worth it to try the service for a bit, see what you think, and compare sales over the next few sales cycles to be sure either way.
While you consider whether or not you want to jump in and offer Square Installments as an option for your customers, check out some of the other reviews for Square services. Find out how much Square charges for its primary services and get armed with more information about Square processing to see if these payment options are right for your business. If you want to try out the service for yourself, sign up for a free Square account today and play with the demo version.