Direct lending, offered by a business directly to its customers for the purchase of goods or services, bypasses traditional third-party lenders. This arrangement allows the seller to act as the financier. A car dealership providing loan options directly to a buyer, rather than requiring the buyer to secure financing from a bank, serves as a clear example. This is often encountered when purchasing big-ticket items such as vehicles, furniture, or electronics.
Such financing can prove advantageous for both the seller and the buyer. For the seller, it expands their potential customer base by serving individuals who may not qualify for conventional loans. This can lead to increased sales and profitability. For the buyer, it offers an alternative route to obtaining necessary credit, potentially with more flexible terms than standard lenders might provide, particularly for those with limited or impaired credit histories. Historically, this lending method has been a valuable tool for businesses to stimulate sales and build customer loyalty.
