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Old 05-31-2019, 02:04 PM   #1
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Default Consumer Financing

One of our suppliers referred us to a consumer finance company but there are substantial fees to the contractor as well as the interest to the consumer. Which we would then have to try to roll into the price.


Is there a better deal out there, one that is cheap/free to the merchant? We are talking about tickets in the $10-50k range.
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Old 06-01-2019, 09:51 AM   #2
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Yea the customer’s own credit card company or his bank. I’d stay the heck out of consumer financing. Getting the money to pay for their little pet projects is their job.
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Old 06-01-2019, 10:08 AM   #3
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Yea the customer’s own credit card company or his bank. I’d stay the heck out of consumer financing. Getting the money to pay for their little pet projects is their job.
I can both agree and disagree with that statement.

I haven't really run into an issue with customers that haven't had the cash/credit available on their own merits, but I see the value in offering financing.

Your job is to run a business, to sell your products and services and turn a profit. Offering financing is simply another way to create more value in your business, generating more profit.

Many people do not set aside enough money for home repairs and the pricing people read on the internet gives them a false sense of what exactly a project or repair will truly cost. So they may simply not have enough cash/credit on hand at that particular time.

Now if your company provides consumer financing and can offer that to the customer on the spot, so that you can both secure the project and you can take care of your customers needs, that can be of great value to the customer.

To the OP, there are a ton of them out there. If you are going to offer financing, the thing to remember is that is should never "Cost" you money. The costs need to be accounted for in your pricing structure. Those costs are something the HO should pay for, you should never make less money when offering financing.

It is just like accepting CC. Do you loose that 2%-3% that the CC processor charges? No, you simply roll that into your pricing to account for the processing fees.
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Old 06-01-2019, 10:37 AM   #4
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If I don't get a residual on the interest, there's no f*ing way I am going to pay the lender. That's a commission in reverse, ballsy to even ask for it.



I'm skeptical, but maybe just cynical, I assume that any consumer credit company looking to partner with contractors won't be a really five star lender.



The last thing I would want to do mix my business with a less than stellar lender, even if I hold no responsibility for the lender's actions. If people have a bad experience - high fee, damage to credit, etc. etc. etc. - most put at least some of the blame on you by association.



In my market where beggers can't be choosers it might help get more sales, in other markets that are more flush, it might only land you customers you don't want. But if I was going to do it I might just stuff a business card and home equity line brochure from a lender I like rather than get involved in the credit. (Yes, I'd prefer a paper medium rather for this.)
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Old 06-01-2019, 12:04 PM   #5
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It may get you more business, but it comes with more risk.

That's what banks and insurance companies specialize in. That's the business they are in.

What business are you in?

Just a thought.
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Old 06-01-2019, 12:31 PM   #6
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In some states when a consumer gets financing through whoever is making the sale, they can stop making those payments if something goes bad.

So if you refer them to ABC Finance for that $50k solar project and it's financed over 20 years, what happens when in year 6 it doesn't work even though you only offered a 5 year warranty? Are they going to be at liberty to stop making payments? Is ABC Finance coming after you?

I'd stay out of it. They need to talk to their bank. Signature loan, HELOC or refi are some of their options, but not with your name on it.
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Old 06-01-2019, 12:54 PM   #7
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2007. Before then easy. After then not good. The end.
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Old 06-01-2019, 01:04 PM   #8
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To the OP, there are a ton of them out there. If you are going to offer financing, the thing to remember is that is should never "Cost" you money. The costs need to be accounted for in your pricing structure. Those costs are something the HO should pay for, you should never make less money when offering financing.

It is just like accepting CC. Do you loose that 2%-3% that the CC processor charges? No, you simply roll that into your pricing to account for the processing fees.
It seems like a disadvantage having to pay the finance company for the customer to take out a loan. If you have to charge $16,000 instead of $15,000 to cover their cost, it is making you less competitive. And if the customer asks for financing after you give them the price, you now have to either eat it or explain that added cost, which they aren't going to like. I hate having to break down any price for a customer.
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Old 06-01-2019, 01:44 PM   #9
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Just so you guys know, there are both good and bad companies that contractors can team up with.

Wells Fargo actually has a home improvement type loan and system set up for these purposes too. An HVAC company I know uses them vs. some of the others out there. They don't have as fast an approval, but they are legit.
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Old 06-01-2019, 01:59 PM   #10
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Just so you guys know, there are both good and bad companies that contractors can team up with.

Wells Fargo actually has a home improvement type loan and system set up for these purposes too. An HVAC company I know uses them vs. some of the others out there. They don't have as fast an approval, but they are legit.
I was thinking last year of starting a thread on this very topic.
I financed a new furnace for my daughters new (to her) house.
All 3 contractors offered financing.
$$ are a bit higher than just a panel change, but it gives the average 'pay to pay' people (and Dads too) a way to get the work done, and just make a small monthly payment.

The interest rate I got was good, and I didn't want to take from my line of credit, so I went that way.

Maybe @flyboy will chime in ??
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Old 06-01-2019, 02:33 PM   #11
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Maybe @flyboy will chime in ??
What?
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Old 06-01-2019, 02:49 PM   #12
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Yea the customer’s own credit card company or his bank. I’d stay the heck out of consumer financing. Getting the money to pay for their little pet projects is their job.
This guy ^^ answered the question - there's nothing else to be said here.

They either have the money, the means or the way to come up with the money, or they don't. All of which is none of your business.
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Old 06-01-2019, 02:57 PM   #13
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This guy ^^ answered the question - there's nothing else to be said here.

They either have the money, the means or the way to come up with the money, or they don't. All of which is none of your business.
Hey buddy, glad to see you back

I agree with you two for my own business. But my average job is less than $1K and my big jobs are less than $5K.

For a company selling $15K jobs, it makes sense for them to offer financing. It's a selling point, if a customer needs a $15K installation and doesn't have the money, but takes financing because it was available, you just got that job due the the financing, right?

Just to reiterate, the OP is talking about $10-50K jobs. So credit cards wont come into play that much in this area.
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Old 06-01-2019, 03:16 PM   #14
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I'm not going to get into the argument or debate as to whether a contractor should use consumer financing or not because it's a no brainer to me. I'm building a business and I'm going to grab as much market share as I can. That means doing everything possible to make it as easy as possible for a potential customer to choose me over the competition by offering every program possible to make that happen.

I don't care if there are dealer fees. I've already built in the dealer fees to every single job I quote. Whether they use our consumer financing or not. Some sanctimonious moron will be along now to tell me how unfair that is.

We use Synchrony and Turns. We also use Enerbank for those less than credit worthy folks.

They all offer different programs at different rates and terms.

We are always higher then our competitors and constantly take business from them because we are the better value, easy to do business with and of course there's my amazing good looks and magnetic personality.
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Old 06-01-2019, 03:56 PM   #15
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Hey buddy, glad to see you back

I agree with you two for my own business. But my average job is less than $1K and my big jobs are less than $5K.

For a company selling $15K jobs, it makes sense for them to offer financing. It's a selling point, if a customer needs a $15K installation and doesn't have the money, but takes financing because it was available, you just got that job due the the financing, right?

Just to reiterate, the OP is talking about $10-50K jobs. So credit cards wont come into play that much in this area.
Good to hear from you too Hax, I hope all is well.

I get your thought process here. I don't agree with it, but I get it.

Let's look at it like this:
The $5k and under maket - most people and most companies can pay for this directly out of pocket.
The $5k - $50k market - most people either need to put this on credit or take out a loan. Most businesses need to have this type of money approved by some type of mid-high level management or possibly this needs to be budgeted into NEXT years budget. (or something like that)
$50k - $500k Few people have this kind of money. At this point, your in a special spot if you are doing residential work. In commercial accounts, this type of money gets reviewed by a board, a president, CEO, etc. Nothing here gets approved quickly, this goes through a long preparing process.
$500k and up People with more money than they know what to do with. Investors. Devolpment Groups. Big corporate accounts.

Now, where does your customer group fall into? (Just a rhetorical question, don't answer) Are they is a certain group but are attempting to make a transaction in another group? If so, that's risky business. Not something you need to worry about, like someone said before, let's the banks deal with this.

People will find the means to buy what they want. You just worry about offering the services that you CAN provide.
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Old 06-01-2019, 04:01 PM   #16
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Good to hear from you too Hax, I hope all is well.

I get your thought process here. I don't agree with it, but I get it.

Let's look at it like this:
The $5k and under maket - most people and most companies can pay for this directly out of pocket.
The $5k - $50k market - most people either need to put this on credit or take out a loan. Most businesses need to have this type of money approved by some type of mid-high level management or possibly this needs to be budgeted into NEXT years budget. (or something like that)
$50k - $500k Few people have this kind of money. At this point, your in a special spot if you are doing residential work. In commercial accounts, this type of money gets reviewed by a board, a president, CEO, etc. Nothing here gets approved quickly, this goes through a long preparing process.
$500k and up People with more money than they know what to do with. Investors. Devolpment Groups. Big corporate accounts.

Now, where does your customer group fall into? (Just a rhetorical question, don't answer) Are they is a certain group but are attempting to make a transaction in another group? If so, that's risky business. Not something you need to worry about, like someone said before, let's the banks deal with this.

People will find the means to buy what they want. You just worry about offering the services that you CAN provide.
I have to admit, respectfully, that I don't understand your thought process.

Read Flyboy's post above. If you are selling your services for $15,000, and you can entice people to buy them by offering financing, why the heck not?

The bank is handling it either way, whether they went to the bank directly or you referred them. If you offer someone a standby generator and they want it but don't have the money, they probably aren't going to go take out a loan for it. But if you tell them that you can hook them up with a $200/month payment plan, you have a much better chance of getting the job.
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Old 06-01-2019, 04:08 PM   #17
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I'm not going to get into the argument or debate as to whether a contractor should use consumer financing or not because it's a no brainer to me. I'm building a business and I'm going to grab as much market share as I can. That means doing everything possible to make it as easy as possible for a potential customer to choose me over the competition by offering every program possible to make that happen.

I don't care if there are dealer fees. I've already built in the dealer fees to every single job I quote. Whether they use our consumer financing or not. Some sanctimonious moron will be along now to tell me how unfair that is.

We use Synchrony and Turns. We also use Enerbank for those less than credit worthy folks.

They all offer different programs at different rates and terms.

We are always higher then our competitors and constantly take business from them because we are the better value, easy to do business with and of course there's my amazing good looks and magnetic personality.
I wouldn't dare suggest you are doing it wrong.

How often are you actually utilizing these types of services?

For me, I could see the benefit of doing this for something like Generator sales, which Im starting to get hot in. Some people want the standby but don't have 8-10k cash, so its not that Im not competitive, they can't pay anyone so I could be offering something that nobody else is offering if I have the ability for them to obtain financing.

Its something I could look into, despite my earlier post, after some thinking on the subject. I'd be interested in hearing just how you actually figure the cost of getting them onboard into your price, because a lot of that prepwork comes ahead of ever receiving any money. I like to do as little as possible until there is a check in hand, which works well for me.
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Old 06-01-2019, 04:12 PM   #18
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I wouldn't dare suggest you are doing it wrong.

How often are you actually utilizing these types of services?

For me, I could see the benefit of doing this for something like Generator sales, which Im starting to get hot in. Some people want the standby but don't have 8-10k cash, so its not that Im not competitive, they can't pay anyone so I could be offering something that nobody else is offering if I have the ability for them to obtain financing.

Its something I could look into, despite my earlier post, after some thinking on the subject. I'd be interested in hearing just how you actually figure the cost of getting them onboard into your price, because a lot of that prepwork comes ahead of ever receiving any money. I like to do as little as possible until there is a check in hand, which works well for me.
FWIW, those $8-10K generator jobs you are talking about go for $12-15K in flyboy's shop

And the OP is specifically talking about $10-50K jobs.
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Old 06-01-2019, 04:15 PM   #19
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I have to admit, respectfully, that I don't understand your thought process.

Read Flyboy's post above. If you are selling your services for $15,000, and you can entice people to buy them by offering financing, why the heck not?

The bank is handling it either way, whether they went to the bank directly or you referred them. If you offer someone a standby generator and they want it but don't have the money, they probably aren't going to go take out a loan for it. But if you tell them that you can hook them up with a $200/month payment plan, you have a much better chance of getting the job.
If you think my posts ramble on and don't make sense, youd hate to have an actual conversation with me. Lol. I'm all over the place.

My 2cents - (1)someone either has the money, (2) they find a way to get it, or (3) they don't have it and can't get it.

At this point in life I'm only concerned with customers 1 and 2. There's too many things going on in my life for me to spend my time worrying about the people that can't pay for what they want. If you have the time to deal with these people and offer them a way to get what they want, then rock on buddy. I don't.
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Old 06-01-2019, 04:23 PM   #20
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If you think my posts ramble on and don't make sense, youd hate to have an actual conversation with me. Lol. I'm all over the place.

My 2cents - (1)someone either has the money, (2) they find a way to get it, or (3) they don't have it and can't get it.

At this point in life I'm only concerned with customers 1 and 2. There's too many things going on in my life for me to spend my time worrying about the people that can't pay for what they want. If you have the time to deal with these people and offer them a way to get what they want, then rock on buddy. I don't.
I appreciate your ramblings, always have.

Here's my view:

We (you and I) have spoken about marketing and getting new customers and closing jobs etc. for years.

Offering financing for larger jobs is just one more way to do that. And I can see how it is effective.

Now for me, I don't do big enough jobs, so that is why I don't use it. Even my standby generator jobs, I let the homeowner or GC take care of everything else, I just do the electric. But if I did big jobs, I would be all over financing as a way to sell more work.
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