5 Reasons Distributors Should Promote Financing To Dealers

Financing is not just a benefit for homeowners: it helps dealers close more jobs and sell more equipment, making it a win-win for dealers and distributors.

The reality is, today’s consumers rely on financing. Although financial experts recommend building an emergency fund that covers three to six months of living expenses, Bankrate reports that 29% of U.S. adults have more credit card debt than emergency savings. About 20% have no savings at all. So, what happens when a homeowner faces an unexpected, large expense, like a new HVAC system?

Both contractors and homeowners find themselves in a difficult situation. The contractor wants to help the homeowner fix or replace their system as soon as possible. The homeowner wants the same thing, but doesn’t know how to pay for it. Sticker shock can slow down the sales process or bring it to a screeching halt, depending upon how the contractor handles the situation.

Offering HVAC financing is an effective way for homeowners to move forward with these projects. By encouraging contractors to offer financing on every job, distributors can support dealer growth while increasing equipment sales.

1. HVAC Financing Turns Hesitancy into Sales

Every time a customer decides to purchase, dealers and distributors win, and financing has been proven to increase sales.

The unexpected cost of a major home repair can leave homeowners feeling anxious. They need an immediate fix to their issue, but likely haven’t planned for a large, sudden expense. The statistics show that when a contractor offers financing to customers, they are much more successful at alleviating that anxiety and closing the sale.

According to a survey by ACCA and Farmington Consulting Group, providing financing to customers has become critical. This is why:

• The average close rate is 38% when contractors don’t offer financing. When they do, the average rises to 49%.
• Contractors who mention financing on every job have an 18-percentage-point higher amount of new and replacement sales that are financed than those who sometimes offer it.
• Contractors who never offer financing see 50% of their sales as base models, while those who always offer it see that reduced to 35%.

It is clear that homeowners not only want financial solutions: they want options. When contractors follow a good/better/best approach, they allow homeowners to pick the solution that best fits their budget and priorities. The contractor should not assume that homeowners want the cheapest option. Financing helps them see how they can afford a better system that fits within their monthly budget.

Every time a homeowner upgrades from "good" to "best," the distributor wins too. Premium systems carry higher price tags, so each sale your contractors make is worth more.

2. More Reliable Cash Flow and Less Risk

HVAC financing provides dealers with secure funding, allowing them to purchase equipment and parts more frequently.

Extending credit to homeowners can be risky, but a financing partner - not the dealer - assumes the risk of bad debt and manages payment collection. Dealers typically receive the full project amount once the work is complete, providing the cash flow to pay distributor invoices promptly and take on the next job.

With third-party financing, payment arrives on a known schedule directly from the lender, so there is no chasing down final invoices or waiting for a homeowner to get paid. That predictability makes it easier for dealers to manage their payroll and keep equipment orders flowing regularly.

3. Increased Purchase Power

Homeowners spend more when financing because they view payments as a way to get more than they would by paying with cash or a credit card.

As we mentioned earlier, a major advantage of offering HVAC financing is the homeowner’s ability to choose the equipment that makes the most sense for them long term. Contractors can typically increase project sizes because homeowners can afford upgrades and add-ons rather than just going with the cheapest options.

When financing is available, the homeowner can focus on which solution fits their monthly budget rather than worrying about upfront costs. Contractors who can break down large investments, such as HVAC systems, into manageable monthly payments win more jobs than competitors who only accept lump-sum payments.

Distributors have a direct stake in that win rate. Delaers who close more jobs order more equipment, more often. And the benefits don't stop there. Financing also widens the pool of homeowners that dealers - and by extension, distributors - can serve.

4. Expand the Number of Customers Served

Encouraging dealers to offer financing on every job will increase their sales if they have the right financing partner.

Some contractors hesitate to offer financing, worried that a customer with poor credit will be denied. Nobody wants to put a customer through a credit check only to give them bad news.

That's where second-look financing comes in. When a customer doesn't qualify with the primary lender, their application is automatically routed to additional lenders that specialize in a broader range of credit profiles, increasing the number of applicants approved. For the dealer, this means fewer lost sales and uncomfortable conversations.

Distributors can strengthen contractor relationships by recommending financing partners that offer second-look options. That one recommendation makes financing work for more homeowners, not just those with excellent credit.

5. Build Stronger Relationships through HVAC Financing Conversations

It’s evident that offering financing helps dealers close more deals and serve more customers, but it can also add another element to the relationship between distributors and dealers. Discussing financing gives sales reps and counter staff a different way to interact with contractors, shifting conversations beyond products to strategies that can help grow their business.

When distributors promote HVAC financing to contractors, they demonstrate their commitment to helping them succeed. Ultimately, this will help them develop stronger, more collaborative relationships and can help build growth for both businesses.