How do I judge a furniture store’s financing offers for customers?

Start with who is actually lending. In many stores a separate lender provides the financing, and the store pays a fee or accepts conditions in exchange. Ask for the agreements and for statements showing what the store has been charged. Those fees may sit in expenses where they are easy to overlook.

Then look at risk. If a customer defaults, does the store absorb the loss, buy the contract back or simply lose the fee? Ask for records of past problems and how they were settled. Also check what the store promises customers about pricing and terms in its advertising and its sales routine, because careless wording can create complaints.

Next, test dependence. Compare how many sales use financing and what the average sale looks like with and without it. If a large part of the business depends on one lender, a change in its terms could hurt quickly. Finally, ask whether the agreement can pass to you and whether you would qualify on the same terms. Your lawyer should review the contract before you commit. Ask your accountant to confirm that any fees show up clearly, so you understand what sales through financing really earn.

Key takeaways

• Get the lending agreements and the fees the store has actually paid.
• Find out who carries the loss when a customer stops paying.
• Confirm the arrangement continues for you on the same terms.