Furniture retailers: Don't give up on offering credit

The field of furniture sales is large, and undeniably competitive. According to Statista, retail outfits in the U.S. selling furniture and home furnishings during 2016 accounted for about $111.5 billion in sales, and this figure has risen steadily each year since a low point ($84.75 billion) in 2009.

"Furniture retailers sold more than $111 billion of goods during 2016."

The chief competition comes from independents and smaller franchises going up against massive brands like IKEA, Williams-Sonoma, Restoration Hardware and Crate & Barrel. When pushed to the brink, smaller outfits might abandon services that seem risky, like offering credit to customers.

In other instances, they may affix exorbitant interest rates to financing plans as a contingency, assuming they won't be repaid. There's a better middle ground between these extremes, though - using alternative credit decisioning to gauge the financial solvency of borrowers. 

Traditional credit isn't the answer 
Speaking with NerdWallet, George Mason University law professor Todd Zywicki said furniture loans are sometimes viewed as "loans of last resort." They often feature double-digit interest rates after an introductory six to 12 months at a low percentage. As such, some believe furniture stores are deliberately pitching such offers to risky customers and assuming they'll default on their purchased couches and easy chairs. 

Ultimately, such tactics aren't necessary. They don't benefit anyone, and almost certainly hurt borrowers. While wanting to protect one's investment is understandable as a business owner, retailers have to wait out blown loans to regain their goods from a repossession agency, which can take months or even years. Anything can happen in that time to jeopardize the seller's goods, meaning that opportunities for loss abound.

Going the alternative route
Offering financing based on alternative credit data doesn't mean furniture retailers extend loans to anyone who walks in, or being overly judicious. Using info gleaned from the PRBC Mainstreet platform, small furniture stores have access to records that aren't necessarily factored into credit scores from FICO or other traditional rubrics. These can help prove the financial responsibility of customers applying for credit. Common data points include timely rent payments, utility bills, phone, internet and cable statements, student loan balances in the process of being repaid, rent-to-own agreements, paid-off car insurance installments and more.

Furniture is an essential household need, and hardworking Americans who might not look perfect in FICO's eyes but have other good factors to their financial histories should be able to acquire it with financing, if necessary. PRBC Mainstreet offers the tools that help ensure positive benefits for those on both sides of this transaction. 

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