In a competitive landscape like the home improvement sector, customer financing for contractors can be a game-changer for contractors and buyers alike. For contractors, giving customers the option to spread the costs of projects with payment plans and competitive rates can significantly increase sales.
You can boost your chances of winning contracts, differentiate yourself from the competition, and even increase the value of each sale. For building managers and homeowners, flexible customer financing options make home upgrades more attainable. They can use these solutions to better manage the cost of everything from new kitchens, to loft extensions and building projects.
Here, we’ll introduce you to the benefits of providing your customers with home improvement financing options, and share some top tips on how you can implement financing into your business processes.
Understanding Customer Financing
Customer financing is the term used when companies and contractors offer customers access to payment plans, which allow them to spread the cost of a project over several months or years. Ultimately, it’s a way for homeowners to pay for renovations, repairs, and home upgrades over time, rather than having to budget for a large project all at once.
There are various customer financing options available, such as:
- Personal Loans: These are unsecured loans, a loan without collateral, from banks or credit unions that can be used for various purposes, including home improvements. Hearth offers access to personal loan options with affordable, fixed interest rates and predictable monthly payments.
- Home Equity Loans: Often referred to as second mortgages, these loans use the homeowner’s property as collateral. Because the lender can seize the property if the loan defaults, interest rates tend to be lower. They provide a lump sum upfront with a fixed interest rate, making them suitable for larger projects.
- Home Equity Lines of Credit (HELOCs): Like home equity loans, HELOCs are secured by the homeowner’s property, which generally results in lower interest rates. They offer a revolving credit line based on home equity, typically with variable interest rates, making them ideal for ongoing or phased projects.
- Credit Cards: For smaller improvements or as a short-term solution, credit cards can be a great option. Hearth’s range of financing solutions for contractors include 0% introductory APR credit cards, ideal for smaller projects.
- In-House Financing: Some contractors provide their own financing options or partner with third-party lenders. These plans may offer flexible terms and streamlined approval processes, enhancing convenience for both parties.
Each type of home improvement financing option has its own terms, interest rates, repayment schedules, pros, and cons to consider. The right option for your company will depend on the priorities of your customers, and the types of projects you work on.
Evaluating Financing Providers
Just as there are different types of customer financing for contractors, there are also various different financing providers to choose from. While there’s no one-size-fits-all strategy to choosing the right financing solution, there are a few things you should keep in mind as you compare your options:
- Interest rates: Lower interest rates make home improvement financing options more appealing and affordable for customers. The lower and more predictable the interest rates your provider can offer are, the more likely you are to win contracts.
- Flexible payment terms: Since every customer will have different requirements, it’s worth looking for providers that can offer a range of payment plans, financing options, repayment schedules, and loan durations. Flexibility allows customers to choose a plan that best fits their budget and specific needs.
- A simple application process: Customers don’t want to spend hours filling out complex forms. A straightforward, easy-to-navigate online application (with rapid approval and response rates), will significantly improve your customer’s experience with your company.
- Integration: The ability to integrate your customer financing solution with your accounting, project management, invoicing, and billing tools will help you to optimize business operations. Integrations with existing tools simplifies administrative tasks, reduces the risk of errors, and ensures you can comply with reporting and tax guidelines.
- Pre-qualification options: Allowing customers to fill out a short financing form and immediately see their estimated monthly payment options (without damage to their credit scores), will significantly improve their experience. This strategy can help clients make more informed decisions about their funding needs.
Additionally, it’s worth making sure your financing provider can deliver funding to customers quickly, so you can get started on their home improvement project as fast as possible.
The Benefits of Customer Financing for Contractors
Plenty of homeowners want to invest in improving the quality and comfort of their homes, but they don’t always have the cash upfront to pay for projects. According to one study, around 22% of people use customer financing to pay for home improvement projects, and 79% of those would recommend using the same method to their friends and loved ones.
Offering access to customer financing options ensures you can convert more customers, by allowing them to spread the cost of their projects over a more manageable period. With the right approach to contractor financing, you can benefit from:
Higher Sales and Increased Buying Power
While many people want to make improvements to their properties, they can struggle to manage high prices, particularly in a difficult economic climate. Being able to spread the cost of a large project into more manageable payments increases your customer’s buying power. This leads to higher project budgets, and more substantial contracts for your team.
Greater Customer Loyalty
One of the biggest customer financing benefits for contractors is that it allows you to earn the trust and loyalty of your customers. When customers see that their contractor offers flexible payment plans, they also see that the contractor is putting their needs first. This means they’re more likely to return for future projects or recommend you to their friends. This enhanced loyalty can lead to repeat business and a strong referral network, both of which help your business grow.
Higher Win Rates
Contractors who offer financing options are more competitive in the marketplace. While customers can easily be dissuaded from continuing with a project when they see the price attached to it, they’re more likely to dive in if they know they can make payments on a flexible basis. Customer financing options reduce objections in the customer journey, and gives customers more encouragement to complete a purchase, and move forward with a project.
Greater Differentiation
Financing options differentiate contractors from their competitors. In a market where many businesses offer similar services, having attractive financing solutions can set a company apart. It shows customers that you’re a forward-thinking company that understands the financial challenges they might be facing. This can help you to compete in a challenging market.
Better Marketing Results
Adding home improvement financing options to your service portfolio can help upgrade your marketing strategy. It gives you a new, powerful benefit and key value differentiator to promote to your customers across every channel. Plus, when customers see they can access financing from you, they’re more likely to recommend your company to others, boosting word-of-mouth marketing potential, and brand awareness.
Integrating Financing into Your Sales Process
While there are many benefits to offering customer financing for contractors, you do need the right strategy to make sure you can effectively integrate this offering into your business processes.
Here are some top tips for success:
Partner with the Right Financing Provider
Start by choosing a financing provider that can offer access to a range of flexible customer financing options, repayment terms, and rates. Ensure your provider can deliver funding quickly to customers, and make sure you can integrate their service with the technology you already use.
For instance, a solution like Hearth allows for a quick and easy financing integration into your daily processes, with a direct connection to your contracting, quoting, and invoicing technology. This ensures you can keep track of all financing options in one place, and immediately share financing forms with customers with a single link, email, or text.
Update your Sales Strategy
Think about how you’re going to share information about your financing options with customers throughout the sales process. You should include information about the solutions you offer in your sales presentations, contracts, quotes, and on your website.
Clearly outline the available options, benefits, and application process to make it easy for potential customers to understand and consider financing.
Additionally, make sure that financing options are seamlessly integrated into your project management and billing systems, so you can process applications and payments quickly, reduce administrative burdens, and improve business efficiency.
Train your Staff Members
Provide comprehensive training for your sales and customer service teams, so they know how to promote customer financing options to your clients. Make sure they understand the different financing plans you can offer, their terms, rates, and eligibility requirements.
Train staff to confidently answer questions about financing, provide clear explanations, and guide customers through the decision-making process.
Additionally, make sure team members know how to assist customers with the application process, from pre-qualification to final approval. The more knowledgeable and supportive your team members are, the better the experience will be for your customers.
Communicating Financing Options to Customers
One of the most important steps in taking advantage of the benefits of customer financing for contractors, is knowing how to communicate the options you can offer to your audience. Start by creating clear documents your team members can use to explain financing options to clients.
Be clear and transparent, clearly outlining financing options, interest rates, repayment terms, and associated fees. Highlight the benefits customers will access if they use these financing options, such as the ability to undertake larger projects and make home improvement costs more manageable.
Make sure information about your financing options is easily accessible to customers, whether you’re including links in your contracts, quotes, and other documents, or outlining terms and conditions on your website. When it comes to promoting your financing options:
- Highlight financing options on multiple channels: Draw attention to the benefits of your financing solutions on every channel, from your website, to promotional emails, and across social media channels. Consider creating articles and pages on your website where you can answer commonly asked questions about financing services.
- Share success stories: Share testimonials and case studies from customers who have successfully used financing for their home improvement projects. Real-life examples can help potential clients envision the benefits and make financing options more relatable.
- Personalize your campaigns: Create content that will appeal specifically to your target audience, focusing on the things they’ll be able to accomplish with your financing solution, like dealing with expensive repairs, or getting the kitchen of their dreams.
Managing Financing Programs
Finally, keep in mind that managing contractor financing programs does require some careful strategizing and ongoing oversight. Here are some quick tips to help you optimize customer satisfaction, and preserve compliance:
- Track program performance: Continuously monitor the performance of your financing programs by tracking key metrics such as approval rates, customer satisfaction, and the impact on sales. Regularly review financial reports to assess whether the financing options are meeting your business goals and making a positive impact.
- Evaluate Partner Relationships: Maintain strong relationships with your financing partners. Schedule periodic reviews to discuss program performance, address any issues, and explore opportunities for improvement. Make sure you stay up to date with new financing options your providers might offer, or limited-time deals they can share.
- Stay compliant: Make sure your financing programs comply with relevant regulations and customer protection laws. Educate yourself on legal requirements, and ensure you’re keeping accurate records for auditing purposes.
- Invest in transparent communication: Clearly communicate the terms and conditions of financing options to customers. Provide thorough explanations of payment plans, interest rates, and any fees. Transparency helps build trust and reduces the risk of misunderstandings or disputes.
- Provide exceptional support: Offer dedicated support for customers navigating the financing process. Ensure that your team is well-trained to handle inquiries, assist with applications, and resolve issues promptly. Exceptional customer service enhances satisfaction and fosters positive relationships.
- Collect and respond to feedback: Regularly gather feedback from customers about their financing experience. Use surveys or call your customers directly for insights into their experience. Use the feedback you gather to adapt your strategy.
Discover the Benefits of Customer Financing
Customer financing options can deliver exceptional benefits to both contractors and customers alike. It’s an excellent way to boost customer satisfaction, increase sales, and help your clients take on larger, more comprehensive projects.
Hearth offers a convenient and simple way to integrate financing solutions into your sales processes. With our solution, you can offer financing options with a link integrated into email, text, quotes, contracts, and invoices, in an instant.
All your customers need to do is complete a short online form, and they’ll gain immediate insights into their monthly payment options, with no damage to their credit scores. If they agree to go ahead with a financing option, they can receive their funds within just 24 hours.
Find out how you can boost sales and customer satisfaction with Hearth’s customer financing solutions today, or sign up for a demo of our comprehensive contractor software.
