If you haven’t heard of the term software-as-a-service, or SAAS, I’m certain you have used a SAAS product either at work or home. Most businesses now employ SAAS applications for all types of business functions – from customer relationship management (heard of Salesforce.com?), to accounting (Quickbooks comes to mind), to graphic design (think Adobe). Even Microsoft’s long-standing productivity applications, Microsoft Office, is now sold and delivered in a SAAS model.
What does this mean? It means businesses pay-over-time for these applications, rather than in an upfront license fee, and can stop and start new users as it needs. Businesses no longer have to plunk down capital to purchase necessary software. They budget for the smaller, on-going monthly expense, just like financing!
Likewise, households embrace many pay-over-time products and services, such as cable or satellite TV, SiriusXM radio service, and utilities. In fact, consumers now our accustomed to paying over time for their mobile phone and associated service. It’s not called financing or extending credit, but it might as well be!
So, why do businesses offer their product/service in a manner and not collect fees upfront? Well, the cost of their product/service appears much smaller, but they will actually make more money over time, provided you remain a customer (that’s a subject for another time!). In effect, a consumer finance related charge is embedded in any pay-over-time program.
Astute retailers with consumer financing programs sell their products for a low monthly fee. It not only resonates with how we pay for other things but it also helps us understand how the monthly fee can fit in to our monthly budgets. This is why more and more consumers are searching online for furniture financing, jewelry financing, or the like.
So, you see, we pay for many things over time. It’s how you go about paying over time that has us calling it financing or not. However, in the end, it’s all financing!
~ David Weyher