How to Offer Finance to Customers: Models, Fees, Legal Rules and a Launch Plan

How do you offer finance to customers? Pick a model, then connect it to your checkout or sales process. The three main models are third-party financing, where a lender pays you upfront and collects from the customer; buy now, pay later (BNPL) apps; and in-house payment plans, where you extend credit yourself. Most small businesses start with a third-party partner because the lender takes on the credit risk and the collections work.

Key takeaways

• Customer financing lets buyers pay over time while you get paid upfront (third-party) or over time (in-house). It is different from a business loan you take out for yourself.
• BNPL typically costs merchants about 4% to 6% plus $0.30 per order, versus roughly 2.5% to 3.5% for card processing. Contractor and healthcare loan programs range from about 0% to 4% on standard-rate loans to 6% to 15% on promotional 0% plans.
• Under Regulation Z, you become a “creditor” if you regularly extend consumer credit with a finance charge or in more than four installments. Regularly means more than 25 times in the prior year.
• The Regulation Z advertising rules apply to merchants even when a third party provides the credit, so “as low as $99 a month” is regulated.
• Contractors, dealers and builders who refer customers to lenders must not discriminate or discourage applications under Regulation B.
• Vendor claims about sales lift range from 17% to over 200%. Test your own results, and use the break-even math below.
• 47% of BNPL users in LendingTree’s March 2026 survey said they paid late in the past year. Clear terms protect your customers and your reputation.

What does it mean to offer finance to customers?

Customer financing is a payment option that lets customers spread the cost of a purchase over weeks, months or years instead of paying all at once. You offer it so that price stops being the reason a customer walks away.

It is not a loan for your business, like equipment financing or a line of credit. It is something you offer your customers.

The main ways to offer finance

Many businesses mix models. A home services company might offer a third-party loan for large jobs and a simple in-house plan for small repairs.

Which model fits your business?

What it costs

BNPL: percentage plus a fixed fee

Commonly published merchant fees for 2026, from provider and comparison pages:

Card processing is usually about 2.5% to 3.5%. BNPL providers generally pay you within one to two business days and take the credit and fraud risk. Direct deals negotiated with providers are often lower than the pass-through rates shown through payment processors, so ask.

Longer-term loans for contractors and practices

Dealer fees (what you pay the lender) depend mostly on the interest rate the customer pays:

Synchrony’s own calculator reportedly defaults to a 7% merchant-fee estimate, and one HVAC guide says contractors commonly build a 5% to 8% buffer into pricing. These figures come from vendor and comparison pages, and some of those pages are written by competing providers, so get written quotes.

Why 0% is expensive: “0% for 12 months” is not free money. The fee you pay “buys down” the rate, so a $10,000 job with a 9% fee costs you $900.

In-house plans: hidden costs

An in-house plan has no provider fee, but it has costs:

• Default losses
• Your cost of capital while you wait
• Admin time and collections
• Possible legal and licensing costs

Illustrative example. You sell 100 jobs at $3,000 on six equal monthly payments at 0%.

• If 6% of plans default after two payments, each default leaves about $2,000 unpaid, so you lose about $12,000, or 4.0% of financed volume.
• If you fund the receivables at 9% and the average balance is about half the ticket over six months, the carrying cost is about $67.50 per plan, or 2.25%.
• That is roughly 6.3% before admin time, which is comparable to third-party fees but with more risk and work.

Does it pay off? Break-even math

Example A: contractor

Illustrative numbers.

• 100 estimates a year at $8,000. Baseline close rate: 30%, or 30 jobs ($240,000 revenue).
• Gross margin is 35%, so baseline gross profit is $84,000.
• Assume 40% of closed jobs are financed and the average fee is 7% of the financed amount. That is $560 per financed job, or about $224 per closed job on average.
• Contribution per job: $2,800 − $224 = $2,576.
• Break-even: $84,000 ÷ $2,576 = 32.6 jobs, a 32.6% close rate. That is about a 9% relative improvement over 30%.
• If financing lifts your close rate to 36%, you close 36 jobs and earn $92,736, about $8,700 more than baseline.

Example B: online order

Illustrative numbers.

• Average order: $135. Gross margin: 40% ($54). Card fee at 2.9% + $0.30 is about $4.22, so contribution is about $49.78.
• A BNPL order at 6% + $0.30 on $135 costs $8.40, which is about $4.19 more than a card order. If the order size doesn’t change, you lose that amount.
• Break-even: the BNPL order must reach about $147, roughly a 9% larger order, or it must bring in sales you would not otherwise have made.
• If orders are 17% larger ($158), you gain about $3.64 per BNPL order.

What the evidence says about lift

Published claims vary from a conservative 17% increase in average order value up to 45%, 85% and even 200%-plus in single-merchant case studies. One agency reports a 39% average conversion lift among its clients. These come from providers, agencies and case studies, so treat them as hypotheses. Run a test: offer financing on your highest-ticket items first, track close rates and average ticket, and compare to your break-even number.

What customers actually experience

• BNPL is mainstream. J.D. Power’s March 2026 study found 37% of US consumers used BNPL in the past 90 days, and 82% of fintech BNPL customers paid in four equal installments.
• Late payments are common. LendingTree’s March 2026 survey found 47% of BNPL users said they paid late in the past year, up from 41% in 2025 and 34% in 2024. The same survey found 29% had used BNPL for groceries.
• The market is still modest. The Richmond Fed estimated 2025 US BNPL transactions at about $70 billion, roughly 1.1% of credit card purchase volume.

For you, the lesson is that financing helps customers who can budget but can also stretch buyers too far. Clear terms and honest presentation protect customers and your brand.

The legal rules every merchant should know

This is general information, not legal advice. Rules vary by state, and a consumer finance attorney should review your program.

1. When you become a “creditor” under Regulation Z

Regulation Z defines a creditor as a person who regularly extends consumer credit that has a finance charge or is payable by written agreement in more than four installments (not counting a down payment), and to whom the obligation is initially payable. You “regularly” extend credit only if you did so more than 25 times in the preceding calendar year (more than 5 times for transactions secured by a dwelling).

What this means in practice:

• A pay-in-four plan with no finance charge generally falls outside the creditor definition for the merchant. A five-payment plan, or any plan with a finance charge, can fall inside it.
• Small volume matters. A business that sets up a handful of plans a year is not a creditor under Regulation Z, though state law and other rules can still apply.
• Regulation Z covers consumer credit (personal, family or household purposes), not business credit.
• If you are a creditor, you must provide Truth in Lending disclosures such as the APR and total of payments.

2. Advertising rules apply to everyone

The CFPB’s official interpretation says all persons must follow Regulation Z’s advertising provisions, including merchants and home builders who are not themselves creditors, if they advertise consumer credit.

• Advertisements may state only terms that are actually available (12 CFR 1026.24(a)).
• Stating a “triggering term” such as the amount of a payment, the number of payments, a down payment or a finance charge requires additional disclosures, including the repayment terms and APR.
• “As low as $99 a month” or “12 months same as cash” is therefore a regulated claim.
• The FTC has pursued advertisers for monthly-payment claims that did not tell consumers the full terms.

The safest approach is to use advertising language approved by your lender and to have counsel review your ads.

3. Fair lending when you refer customers

Under Regulation B (the Equal Credit Opportunity Act), real estate brokers, automobile dealers, home builders and home-improvement contractors who only accept applications and refer applicants to lenders are treated as creditors for two rules: no discrimination, and no discouraging applications. That means:

• Offer financing consistently to all customers.
• Don’t steer or discourage anyone on a prohibited basis, such as race, sex, age or national origin.
• Train staff on scripts that apply to every customer.

If you extend credit yourself, you also owe adverse action notices when you deny an application or make a counteroffer the customer doesn’t accept.

4. BNPL regulation has shifted to the states

• Federal: the CFPB withdrew its 2024 interpretive rule on BNPL on May 12, 2025. Consumer advocates note that the withdrawal does not mean the earlier interpretation was wrong, and courts remain free to consider it.
• New York: the BNPL Act (Banking Law Article 14-B), enacted in May 2025, requires BNPL lenders to be licensed. The NYDFS proposed implementing regulations in February 2026. In the reporting I found, the rule was still in the proposal stage, and it would take effect 180 days after final adoption. The law’s definition of BNPL is broad (closed-end credit provided with a consumer’s particular purchase), so merchants extending their own installment credit in New York should ask counsel whether it reaches them.
• California and others: California has treated pay-later companies as lenders since 2020, and states differ widely.
• Your partners: if you use a major provider, the provider usually holds the licenses. Ask any partner to confirm it is licensed where you sell.

5. State laws for in-house plans

Many states regulate retail installment contracts and consumer lending through separate statutes that can cover licensing, maximum finance charges and contract content. If you pull credit reports, the Fair Credit Reporting Act requires a permissible purpose and certain notices. In-house lenders may also have privacy and data-safeguard duties under the Gramm-Leach-Bliley Act. Confirm all of these for your state.

6. Pricing and “0%” claims

If you charge a higher price to financed customers than to cash customers, regulators may treat the difference as a finance charge, and calling the plan “0%” could be misleading. Get legal advice before using different prices. If you promote lease-to-own, don’t describe it as a loan. A 2020 FTC settlement with a large lease-to-own provider involved allegations that consumers frequently paid about twice the sticker price if they made every payment.

Step-by-step: how to launch

1. Define your goal. More closed jobs, bigger orders, or fewer abandoned carts. Pick a number you can measure.
2. Review your ticket sizes and customers. Under $1,000 usually points to BNPL, and $2,000 and up points to installment loans.
3. Choose in-house or third-party. If you are unsure, start third-party.
4. Shortlist two or three providers and compare:
   • Merchant fees by product, including promotional plans
   • Approval rates for your customer mix, and whether a multi-lender platform tries several lenders after a decline
   • Funding speed, and whether the fee is refunded on returns
   • Integration with your payment processor, CRM or estimating software
   • Whether the provider is licensed where you sell
5. Get everything in writing: fee schedule, funding terms, chargeback rules, and the provider’s approved marketing language.
6. Set up in-house terms (if applicable): deposit, term, interest or fees, late fees, a written agreement, a credit policy, and an accountant-approved process for recording receivables.
7. Integrate: add financing to your checkout, estimates, invoices and payment links so customers can apply from the price.
8. Train your team. Everyone should explain the options the same way, and offer financing to every customer.
9. Launch with a pilot, for example your highest-ticket items or one location.
10. Measure and adjust (see below).

How to talk about financing

• Raise it early, before sticker shock, ideally at the estimate or product page.
• Offer it to everyone, not just to customers you think need it.
• Use “good, better, best” options with monthly payments shown alongside total cost.
• Show the total, not just the payment. Customers who understand terms are less likely to complain later.
• Don’t pressure. Financing is an option, not a push.
• Explain deferred interest plainly if you offer it: if the balance isn’t paid in full by the end of the promotion, interest may be charged from the purchase date.

Advertising checklist

• Use lender-approved wording and disclosures.
• State only terms customers can actually get.
• If you show a payment amount, include the required terms in a clear, prominent way.
• Avoid “guaranteed approval” and “no credit check” unless the provider confirms it in writing.
• Keep advertising consistent across your website, social media and signage.

Measure results

Common mistakes

• Offering 0% promotions on every job, including small tickets where the fee destroys margin.
• Comparing only headline fees and ignoring approval rates.
• Advertising monthly payments without the required disclosures.
• Assuming a third-party partner handles all compliance, including your own advertising.
• Offering financing only to some customers.
• Starting in-house plans with no credit policy, written agreement or collections process.
• Hiding the total cost, which invites complaints and refunds.

Industry quick guides

E-commerce and retail. BNPL through your payment processor or platform is the fastest launch. Compare fees and returns handling, and place the offer on product and cart pages.

Home services and contractors. Use a multi-lender or installment platform and build the offer into your estimates. Reserve 0% promotions for larger jobs, or build the expected fee into your pricing strategy with legal advice.

Auto repair and tire shops. Customers often need fast approval for urgent repairs. Card-based plans and lease-to-own providers are common, so make sure customers understand the total cost of lease-to-own.

Dental, medical and veterinary practices. Third-party medical financing and in-house plans for small balances are common. Explain deferred-interest terms carefully.

B2B sellers. Net terms and trade-credit platforms are standard. Regulation Z covers consumer credit, not business credit, but state rules, contract terms and collections practices still matter.

FAQs

Bottom line

Offering finance can help you close sales customers can’t afford upfront, but only if the economics and the legal setup work. Start with the model that fits your ticket size, get fee quotes in writing, calculate your break-even, use lender-approved advertising language, and train your team to present financing fairly to everyone. For in-house plans, plan for defaults and compliance before you extend your first dollar of credit.

This is general information, not legal, tax or financial advice. Rates, fees and laws change and vary by state. Consult a consumer finance attorney and your accountant before launching a program.