In today’s competitive environment, offering home improvement customers competitive financing options is a must. Studies show that half of the American consumers would have trouble writing a check for $1,000 in an emergency. And most home repair and improvement projects cost much more than that. Even many homeowners are cash-strapped.
By partnering with a consumer finance company that specializes in the home improvement industry, your business may realize some important benefits:
1. Close More Deals
Having financing services available gives home improvement customers the flexibility to choose the payment option that fits their budget. You can show potential customers that they can get all the materials they need by breaking down expensive purchases into affordable monthly payments.
This way, you immediately eliminate the biggest buying constraint and increase their purchasing power.
A recent study found that home improvement companies that started offering a financing program to customers were able to increase sales by an average of 32%. So, if one of your KPIs is to close more deals, you should consider implementing a contractor financing program.
2. Increase Your Average Deal Size
By showing how a slight increase in your home improvement customers’ monthly payments can help them get their desired upgrades, you can up-sell your customers. When it comes to home improvement projects, a relatively small upgrade can be what makes the project cross the line between a regular home renovation and a dream home renovation for a customer.
Making it possible for them to get that extra piece of furniture, paint that additional room, or add a pool to their outdoor space not only improves their experience as a customer but also makes an enormous difference for your company in terms of revenue in the long-term.
Your affordable financing program can be a key piece of your sales when it comes to increasing transaction sizes and driving up your business’s average order value. A survey found that organizations’ average transaction size increased by 15% when they started offering home improvement financing to customers.
3. Reduce Financial Risk
When you choose to have a third-party financing company managing your customers’ transactions, you avoid all the damage associated with direct consumer lending.
If not carefully managed, consumer financing can cause serious damage to a contractor’s cash flow. Since the specialized third-party lender is responsible for everything after the checkout, you delegate this risk.
They will determine the interest rates based on credit score, collect monthly payments, and secure late and missed payments.
This means that you can offer customers low monthly payments without having to assume any financial risks.
4. Build Customer Loyalty
Allowing customers to purchase with flexible financing options will provide customers with an excellent experience with your company. 93% of customers who use consumer financing to make a purchase would choose to use it again for future purchases.
This means that offering financing services through a specialized third-party company will help you create a long-term relationship with clients. Aside from the obvious advantages this service offers to clients, the interest rates are typically lower than those offered by credit card companies.
Once customers know about your financing options and understand how they can benefit from them, they will be more prone to think about your brand when they need your service again -- or even to recommend your company to friends and family.
5. Attract New Customers
In the same way that you will retain customers, you will start seeing more new faces entering your business’ door. Your financing programs will allow you to grow your potential customer base by making your products and services affordable to a larger number of people.
If customers can choose between buying a product in your store, where they can count on flexible financing alternatives, or buying that similar product in a store with a strict payment process, they will choose your store.
Breaking down large purchases into manageable payments is a simple way to enlarge your pool of potential customers. It’s as simple as that.
6. Access Your Money Faster
Partnering with a third-party financing company allows you to access the money pertaining to your services and products as soon as you sell them.
In almost every case, your company is paid the full purchase amount once the customer signs off on the work. So, your business is not affected by cash flow issues that can arise with in-house lending programs.
This means that your company won’t be held accountable if a customer misses a payment or fails to pay the loan amount. The financing company is the one assuming the risks. This benefit alone can pay off in a short period of time.
The benefits of offering a consumer financing option for home improvement, construction, rehabilitation, plumbing, roofing, water filtration, and similar customers are overwhelming. Those contractors still relying on bank and credit union financing and credit card financing are increasingly being left behind.
To partner with a finance company that understands your business and can help you offer your customers a convenient and affordable financing solution, fill out our vendor application.
