Sales financing is nothing new. Furniture stores, car dealerships, home appliance merchants and other retailers have been using financing for years to help close deals and, in many cases, increase the size of a purchase.
Over the past few years, a number of finance companies have begun offering financing options to service industries, including home improvement and painting contractors.
A CONTRACTOR-CONSUMER WIN-WIN
According to Miron Lulic, founder and CEO of SuperMoney.com, a point-of-sale lending platform, “When done correctly, point-of-sale financing is a win-win for both businesses and customers.”
One set of research found that companies offering financing (via PayPal and PayPal Credit) saw an increase of 32% in sales,” says Lulic, “and an average increase in order value of 75%. And in many instances, there’s little to no cost to the contractor to make financing available to their customers.”
Understand your options
In general, financing companies provide a partnering pro with a mobile app or a link to introduce customers to payment options during the estimate process. In most cases, it’s up to the customer to complete the credit application. Once approved—very often in a matter of seconds if done digitally—the partnering contractor is notified that financing has been secured.
A few of the ways lending offerings and providers may vary include:
■ To whom the funds are paid (consumer vs. contractor … as a contractor, you want direct payment)
■ Terms of payment to the contractor (in-full at the start or close of a project, or split between start and completion)
■ Fees for businesses, consumers or both (origination fees, discount fees, APR, etc.)
■ Collection practices (know who is holding the paper for your customer)
■ Customer support to both the contractor and their customer
According to Joe Francesconi, president of United Consumer Financial Services, there’s more to choosing a financing partner than just fees and terms. “Whoever you work with will, in essence, will be an extension of your company. Look for a partner who helps you grow, helps more of your customers get approved (even those with challenging credit) so they can move forward with the project right away, and who will treat your customers professionally throughout the life of their repayment. Your reputation and referral business depend on it.”
A NO-HASSLE DIFFERENTIATOR
For Elias Reyes of Kings Painting in Archbold, OH, offering financing has proven to be an effective differentiator in the bidding process.
A commercial and residential painter, Reyes says he’s been asked about financing in the past, especially for large jobs, but didn’t have a solution. “I’ve been using Joist for estimates for quite a while and liked it, so when they announced they were offering it at no cost to my company, I jumped on board,” he notes. “It’s been really nice and easy to include the financing option in the estimating discussion. When I email the estimate, links to the different payment options are built right in. The customer can click and find out the terms and make the choice that works for them. There’s zero involvement on my part and no cost to me to provide it.”
Reyes adds that, in his area, a lot of contractors are still very much “written-estimate kind of guys.” Being able to provide estimates and financing options via email, says Reyes, “really sets me apart from other bidders.”
PARTNER FOR SUCCESS
At a time when more and more homeowners are turning to loans to cover costs, offering financing with fixed monthly payments can make a lot of sense. Be sure you fully understand how an offering works and choose a partner who helps you grow and will respect your customer as much as you do.