In a recent blog post, we discussed how in-house financing can be an effective vehicle to grow your home improvement business. This time, we’re going to shift focus to talk about why you’ll want to look into offering your clients financing sooner rather than later, the types of loans you could be offering, and the key qualities to look for in a lender.
Why start now?
It starts with big-ticket residential remodeling activity has seen record growth this year. Since nationwide remodeling activity tanked in 2011, the residential remodeling index (RRI) has now experienced 25 consecutive quarters of year-over-year gains. As of Q2 2018, the RRI stands at 114.4, a new all-time high.
Experts predict that positive growth will continue through 2021, thanks to the long economic expansion and a still-strong housing market.
So why start now? The earlier you begin to actively maximize this growth, the higher your returns will be. Don’t miss the boat!
What loan types should you offer?
When you’re looking at financing options, there are two basic types of contractor loans: installment and revolving.
- Installment loans have a predetermined length and end date. The customer pays the loan back in scheduled monthly payments, gradually reducing the principal until the loan is paid in full. Installment loans are best used for transactions where there won’t be an opportunity for a repeat, as in a brand new kitchen or a new roof.
- Revolving loans do not involve a lump sum or a set payment schedule; just the ability to borrow up to a certain maximum. They are open-ended, and any funds repaid will be available again for borrowing. Revolving loans are best used for high-repeat transactions such as HVAC service contracts.
What should you look for in a lender?
Credentials and industry standing aside, these are some of the things to look for in a lender:
- Fast decisions – They need to be able to turn a credit decision around for you over the phone and while you’re with the customer: between one to three minutes.
- Simple, paperless process – All data entry should be completely secure and paperless for your customers’ protection and your salespeople’s convenience.
- Mobile-optimized website – Your customers and salespeople need ready access to the lender’s website in case of questions.
- Promotional options
- Service capabilities
- Field support and training
- Pricing and hidden fees
- Contact Us
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