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How to Offer Financing to My Customers

April 13, 2021
Michael Tsidulko
How to Offer Financing to My Customers

If you were thinking about offering financing to your clients, you might imagine that your business will extend the credit directly, and your clients will then pay you back. While it is one of the ways to offer financing to your customers, there are much easier and less complicated alternatives.

Contractor financing is a way to let customers pay for service or job over time, instead of upfront. While customers pay over time, contractors get paid in full or enough to finish the project and get the rest as soon as the job is complete. Contractor financing options for customers are the lifesavers when homeowners can't afford the whole price upfront.

What are the benefits of customer financing?

Customer financing for contractors can be beneficial to both the contractor and the customer. The first can increase revenue and job size, and the last can get access to larger projects and benefit from faster start dates. Below are some other benefits from offering financing to customers.

Benefits for your business:

  • Look more professional
  • Become the most convenient company to do business with
  • Provide clients with more options
  • Increase sales (by selling more projects)
  • Improve customer satisfaction and loyalty

Benefits for your customers:

  • Reduced stress
  • Convenience
  • Access to larger and better quality projects
  • Faster start and completion dates
  • Good and bad credit borrowers can qualify for financing
  • No need to pay all at once
  • Affordable monthly payment plan

What are my customer financing options?

Generally, you have three financing options:

  • Extend credit yourself
  • Dealer financing
  • Third party financing

Extend credit yourself

As mentioned above, you can extend the credit yourself. That means you will need to run credit checks to determine creditworthiness, process all the paperwork, and collect payments on your own. It is a riskier, more time consuming, and more responsible option, especially if the client stops paying.

Dealer financing

You can also work with lenders directly. In this case, if you want your clients to have multiple options from various lenders, you will have to partner with several lenders. You will have to find a lender that will work with you on an affordable and repeat basis.

Third party financing

However, there is a third option, which is especially good if your business is small: third-party financing for your customers. The third party will connect your customers to lenders who provide financing. Third-party services usually have a network of multiple lending partners who can deliver pre-qualified loan offers. It means your clients can receive more competitive offers from trustworthy lenders when they request financing, compare rates and monthly payments, and move forward with the desired option.

To learn more about all these options, read this article about home improvement financing: "What You Need to Know Before Offering Financing to Customers"

How do I offer financing to my customers?

Customer financing allows contractors to convert people from simply thinking and looking to actually buying services. And the easiest way to start offering financing to your clients is to partner with a third party, like Enhancify, that has a network of lenders.

Then, as you have a partner, start offering financing by letting your customers know financing is an option. You can tell your customers about this on your website or directly. With a link to financing options on your website, your customers or prospective clients can even pre-qualify for financing themselves before talking to you.

When your customers apply for financing through your partner, they can see several options, depending on how many lenders can pre-approve them. In most cases, lenders will conduct a credit check to see if your clients qualify, but some partners show options using just a soft credit pull (which does not affect credit score). Still, a hard pull will be performed when the customer decides to proceed with the application.

If your customer is approved for financing and has agreed to all the terms and conditions, it's your time to step in. You either get paid after the project is complete or get a part of the payment upfront and the rest upon completion of the home improvement project.

PRO TIP: If you don't know how to begin talking to your customers about homeowner financing, try this:
"Hey folks, just a heads up: 50% of our customers pay with check, card or cash. The other 50% prefer financing with an affordable monthly payment. Help me out, which bucket do you fall into?"

What are the customer financing costs?

The benefit of offering financing to your clients implies some fees that totally depend on the third party you partner with. The first fee you may face when you decide to offer financing to your customers is a one-time set up fee. However, not all partners charge this fee, so if you shop around, you can find companies that offer free registration.

Financing partners can also charge a monthly fee or a fee for the annual plan. The monthly fee may vary based on the number of transactions or on the tier you choose. Some partners also charge fees for the 0% interest financing, dealer fees, or transaction fees for each project. But not all partners do that. For example, Enhancify offers three levels of annual plans, and that's the only fee a contractor will need to pay for the benefit of offering financing to the clients.

Plus, there are financing partners who allow contractors to offset the fees they pay. Thus, Enhancify pays commissions for each closed deal, plus it pays for referrals.

The bottom line

Offering customer financing is the key to growing your business and getting more revenue. You will look more professional and improve customer loyalty. But most importantly, your customers get the services they need.

50% of all home improvement jobs over $5,000 are financed. Plus, homeowners research financing options before investing in home improvement project. So contractor financing for customers can open doors to more sales and bigger jobs to the benefit of contractors and homeowners.

Don't think you customers want or need financing? Read this story about how just offering financing increases sales: "None of My Customers Ask about Financing. I Don't Need to Offer it. [with Case Study]"

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