Offering home improvement loans for customers looking to invest in a new project or repair could be one of the best ways to grow your business. The home improvement market is growing at an exceptional rate, as consumers look for ways to boost their comfort, and the value of their property.
In fact, in 2024 experts predicted homeowners in the US alone would spend more than $485 billion on home improvement projects. But not everyone has the budget or savings required to pay for an entire project all at once. Project loans offer an easy way for consumers to spread the cost of their repairs, remodeling strategies, and renovations out over a period of months.
Not only does this lead to a better experience for your customers, but it can help your contractor business grow, ensuring you win more contracts, and connect to a wider clientele. Here’s everything you need to know about offering project loans to your home improvement customers.
What are Project Loans?
Project loans are a form of customer financing option that allow homeowners to fund home improvement projects. They give customers immediate access to a lump sum of money they can use for renovations, repairs, or even large-scale projects, like home extensions.
Unlike traditional loans or credit lines, project loans are generally intended specifically for home improvement efforts. Depending on the types of contractor financing options offered by a company, consumers can access flexible terms and repayment rates, as well as fantastic interest rates. Companies like Hearth even offer 0% APR introductory credit card rates.
Most project loans are “unsecured, ” meaning that homeowners don’t have to use their property or other assets as collateral, reducing the risk of borrowing money. Plus, they benefit from an ultra-fast approval process, with most consumers getting payments in a matter of days.
For homeowners, project loans make it easy to spread the cost of home improvements over time, reducing the strain of investing in large projects. They can use these loans to increase their home’s value, improve the comfort of their property, and even make crucial repairs.
Benefits of Project Loans for Contractors
Home improvement loans aren’t just beneficial for customers. While homeowners benefit from using these loans to improve their home’s value and design, contractors benefit from an opportunity to increase customer loyalty, contract win rates, and revenue.
Contractor project loans give you an opportunity to:
- Access higher spending power: When consumers have access to financing, they’re more likely to take on larger, more comprehensive projects. This leads to greater revenue per project, as customers aren’t restricted by financial constraints. With Hearth, contractors can increase contract sizes by an average of 30%!
- Higher conversion rates: Offering project loans to customers means you can convert a wider number of customers, including those who may otherwise avoid taking on projects due to limited funding. Once again, this has a direct impact on your company’s profitability. Hearth’s funding solutions help companies close up to 17% more deals.
- Improve customer satisfaction: Giving customers access to home improvement loans shows them that you’re putting their needs first. It’s a great way to build stronger relationships with your customers, and earn their loyalty.
- Optimize payment processes: Not only can you increase sales with loans for customers, but you can also access payments a lot faster. Collecting money from customers is often much easier when there’s a payment plan already in place.
- Gain a competitive advantage: Project loans can significantly set your company apart from competitors who offer less comprehensive financing options. This is a great way to differentiate yourself from other contractors in a competitive market.
Eligibility and Requirements
Offering project loans to customers is an excellent way to increase sales, build stronger relationships with clients, and separate your business from the competition. However, navigating the world of contractor project loans can be complex for beginners.
First, you’ll need to ensure you meet with the eligibility criteria of the lender you’re going to be partnering with (unless you’re offering in-house financing). Different lenders have different eligibility requirements to consider. Some may require a business to have been operating for a certain number of years before they can begin offering loans.
Others may ask contractors to demonstrate their own credit worthiness before they can distribute loans to consumers. In most cases, you will need to operate an accredited business. This means making sure you’re licensed, bonded, and appropriately insured.
Before you start offering project loans, make sure you:
- Review all of your licenses and accreditation to ensure they’re up to date and meet with industry standards.
- Research lenders you want to partner with, for insights into their eligibility criteria, approval, and application processes.
- Strengthen your financial health, and make sure you have a good credit score, as well as a robust ability to track your cash flow.
How to Apply for Project Loans
The exact process of applying for project loans as a contractor can vary depending on the lender or partner you work with. Hearth makes this process easy; by ensuring you can instantly embed project loan options into your contracts, invoices, and estimates, and track processes in an all-in-one environment. The process for applying for project loans usually involves these steps:
- Research lenders: Identify lenders specializing in project loans for home improvement businesses and contractors. Compare their interest rates, terms, loan options, and the technology they can offer to help you manage loan distribution.
- Prepare your documents: Gather any essential documents you might need, such as your business license, proof of insurance, financial statements, and tax returns. You may also need to provide a business plan or portfolio showcasing your completed projects.
- Complete the application: Fill out the application form offered by the lender, providing detailed information where possible about the types of services you offer, your business, and how many years you’ve been operating as a contractor.
- Review and sign the agreement: Once your application is reviewed, your lender might offer you a partnership agreement. Review the terms and conditions carefully, then sign the agreement to finalize the partnership.
The Customer Approval Process
If you choose the right lender to partner with, the customer approval process can be very straightforward. With Hearth, all a contractor needs to do is send a link to an application to their customer. You can add a link to your Hearth Quotes, Contracts, or Invoices, or email or text a link directly to a customer. Once they click on the link they’ll be taken to a short online form.
The financing form will ask for a few details about their project and their financing needs, and immediately show them their monthly payment options. This form will immediately “pre-qualify” customers for a loan, without affecting their credit scores.
Homeowners can then choose from a range of financing options, including personal loans and 0% introductory APR credit cards, with terms ranging from 6-18 months. They can then apply for the loan they want, and their credit score will be reviewed.
If a customer’s application is reviewed, they’ll receive a notification, and their funding can be delivered directly to their bank account within as little as 24 hours.
Integrating Project Loans into Your Business
Once you’ve successfully created a partnership with a lender, integrating project loans into your business processes can be relatively straightforward. With Hearth, for instance, you can easily embed project loans into daily processes, like sending estimates to customers.
Here are a few quick tips to help you integrate project loans into your business:
- Link your technology: The ability to access loan solutions and embed application links into your existing quotes, estimates, and invoices can save you a lot of time as a contractor. Look for a solution that allows you to connect your financing options to your existing project management and invoicing tools, as well as your accounting software.
- Update your sales strategy: You can only increase sales with loans if you know how to implement them into your full sales strategy. Think about how you’ll be able to introduce the benefits of project loans to your customers when you’re bidding for projects, or promoting the services you offer on a range of channels.
- Train your staff members: Train your team members with insights into the types of project loans you can offer, how they work, and how customers can apply for them. Make sure your teams can confidently answer questions about project loans, and inform customers of the benefits involved in using these finance options.
- Keep track of your loans: Making sure you can keep track of loan applications and payments is crucial. It ensures you’ll know when you can start projects, and when you can expect payments from customers. Using a financing integration in your existing project management and invoicing platform will help you monitor the loan process.
- Implement a plan for customer communication: Ensure you have a strategy in place for following up with customers and reminding them to make payments. A solution like Hearth’s platform will allow you to send automated notifications to customers when deadlines for payments are approaching, saving you time on following up about payments.
Tips for Promoting Project Loans
For most contractors, the key to unlocking the full value of project loans for increased sales and customer satisfaction, will be ensuring you promote your funding options effectively. Don’t just list the terms “financing available” on your website. Make a proactive effort to introduce project loans to customers and generate hype for your company. Focus on:
Educating your Customers
Although up to 22% of people in the US say they’ve used some form of financing to pay for home improvement projects, many consumers still don’t fully understand how project loans work. Make sure your customers know everything there is to know about your funding options.
Create a page on your website where you can outline all of the terms and conditions of the loans available, explain how funding will be delivered, and introduce repayment options. You could even create an FAQ page for your website or mobile app.
Simplifying the Application Process
Make sure it’s as easy as possible for your customers to apply for project loans. Working with the right lender will help, but it’s also important to ensure your sales and marketing teams provide customers with the right information.
Consider creating guides and documents that give your customers tips on how to improve their credit score before applying for a loan, or check their debt-to-income ratio. Adding links to documents like quotes and estimates that direct customers straight to the application process can also improve their overall experience, and streamline the purchasing journey.
Experiment with Promotional Campaigns
Explore a range of ways to connect with your audience and introduce them to your loan options. Promote your financing solutions on your social media pages, with a link back to your website where customers can learn more. Add a link to the loan application page on emails you send to customers in your subscriber list.
It’s also a good idea to draw attention to customers who have previously completed projects with the help of project loans. Publish case studies and testimonials on your website and social media pages, or consider using a counter on your website that shows how much funding you’ve helped customers access. This will help you to earn the trust of your target audience.
Unlock the Potential of Project Loans
Project loans are a valuable solution for consumers and contractors alike. With the right financing options, customers can invest in projects that improve the comfort, design, or value of their home, without worrying about budget restrictions.
At the same time, contractors benefit from access to customers with greater purchasing power, as well as higher contract win rates, and boosted customer satisfaction scores.
Find out how you can unlock the potential of project loans, and increase your sales today, with the help of Hearth’s all-in-one solution for financing, project management, and payment processing. Contact our team, check out our amazing success stories, or request a personalized demo of our contract-focused software. Get started here.
