How to Choose the Best Customer Financing Company for Your Contracting Business

For many in the home services and HVAC industries, the business benefits of customer financing and increasing homeowner preference for monthly payment options are undeniable.

The growing demand for financing has led to a boom of customer financing solutions for contractors to sort through. These solutions include larger, more traditional banks offering contractor financing programs; customer financing companies that specialize in niche markets; and technology-driven financing platforms.

With so many options available, how do you find the right customer financing solution for your business? Vendor selection is never an exact science, but there are three key areas to consider when assessing a potential financing partner.

1. What Financing Programs or Lending Solutions Do They Offer?

While this point may seem like a no-brainer, determining which financing programs to offer is a strategic decision that requires you to understand your customers’ needs.

For instance, same-as-cash loans are good options for customers that expect to have the entire lump sum available shortly, while customers short on cash may be better off with a traditional installment loan. If your homeowners need multiple services over time, they’ll likely have more use for revolving credit.

You’ll also want to ask about contractor or dealer fees. While some programs might be free for contractors to offer, same-as-cash financing or programs with very low interest rates for homeowners tend to come with dealer fees. It’s common for the fee to equal a percentage of the total amount funded, but it ultimately depends on the lender and program.

Of course, there is still tremendous value in offering programs with dealer fees. They’re usually more attractive to homeowners and can help you close sales you wouldn’t have otherwise. Just be sure to factor the cost into your overhead.

2. What Are Their Eligibility Requirements for Homeowners?

This question is closely related to the previous one, as the programs and interest rates available to your homeowners will depend on the lender’s eligibility requirements.

For instance, some customer financing companies will only lend to homeowners with prime and super prime credit scores (usually 660 or above). The upside is that it allows them to offer borrowers lower interest rates. The downside is that these stricter requirements exclude a large pool of homeowners, meaning you’ll have to deal with more declinations.

In that case, you’ll likely want a second financing source for your rejected homeowner applications. While this is common practice, it requires more work on your part. Homeowners will also have to decide if they want to take another hit on their credit score.

One way to fix that problem is to choose a lender with options for credit-challenged customers in the first place. Or some finance companies, like FTL Finance, will pass along any applications they can’t approve to another lender that could. This practice is called waterfall lending, and it helps increase homeowner approval odds without much additional work for contractors or multiple pulls on a homeowner’s credit.

3. What Level of Support Can They Offer Your Team?

Offering financing to your customers has a huge positive impact on your customer experience—but only if the financing process itself is as frictionless as possible. The best customer financing companies have tools that enhance your customer experience without creating extra hassle for you or your team.

It’s also not a bad idea to ask about financing training for your team. You don’t need to be an expert to offer financing to your customers. But you should be able to confidently explain the programs you’re offering and answer any basic questions about them.

If you’re new to offering financing, or you suspect your team could benefit from more hands-on support, ask potential partners what resources they have to help you successfully implement their programs into your operations. At FTL, for instance, each contractor receives two dedicated support team members. One team member helps with initial program selection and ongoing training, while another helps with day-to-day account maintenance and technical support.

Ultimately, your financing partner should feel like an extension of your business—especially since many homeowners will regard it as such. A positive financing experience may lead to your customers having a more favorable opinion of your company, increasing both sales and positive word-of-mouth.