Same-as-Cash Financing: What Is It, and How Does It Work?

If you’ve been in the home improvement industry for any length of time, you’ve likely come across this offer or something similar: “90 days, same-as-cash.” Many homeowners find these offers enticing, making them useful promotional tools.

However, contractors offering same-as-cash loans have a responsibility to ensure they understand how they work. Not only will it help you determine whether they’re a good fit for your business, but you’ll be better prepared to answer any questions your homeowners may have about them.

What Is a Same-As-Cash Loan?

A same-as-cash loan is a deferred interest lending solution where the customer owes no interest or monthly payments during a set promotional period. Promotional periods vary by lender and program, but they generally range from 90 days to 12 months.

However, keep in mind that interest will still accrue during that promotional period. But if the customer pays off the entire principal balance before the period ends, they won’t have to pay that interest. In other words, they wind up spending the same amount they would have if they had paid with cash upfront.

Why Offer Same-As-Cash Loans?

It’s a common misconception that if a homeowner wants customer financing, they can’t afford to pay out of pocket. While this can often be the case for some customers, others will have different reasons for not wanting their cash on hand tied up at the time of purchase.

For instance, several state governments, local governments, utility companies, and even some manufacturers offer rebates or other incentives to homeowners who make energy-efficient upgrades to their homes. Same-as-cash offers allow them to defer payment until they receive their rebate without incurring interest charges.

In other cases, customers might be expecting a bonus from work soon. Or maybe they planned to use that money for another purchase and would like more time to work an extra expense into their budgets.

In any of these scenarios, customers are taking advantage of a principle called the time value of money: cash in-hand is worth more today than it will be in the future. For these homeowners, financing helps free up their present cash for other, more timely matters, like investing or saving.

For contractors, same-as-cash offers could boost sales for some smaller jobs that aren’t a great fit for other financing options, like installment loans.

Important Considerations for Offering Same-As-Cash Financing

While same-as-cash loans are helpful for many homeowners, they won’t be a great fit for everyone—especially those who aren’t confident they can pay the entire balance before the promotional period ends. If the promotional period ends and the homeowner still owes a balance, they now owe whatever interest has accrued on the principal, too. They’ll also owe whatever interest accrues on the remaining balance moving forward until they pay the loan off.

Because interest rates are often higher for this type of loan, it’s best to talk with your homeowners to ensure they understand and are comfortable with the terms before signing the dotted line.

You’ll also want to ask your financing partner about dealer fees. While these loans can mean no interest for the homeowner, contractors will often pay a fee every time a homeowner selects this option, usually in the form of a percentage of the total amount funded. This fee will depend on who your financing partner is and the loan terms.

Even with these considerations, same-as-cash financing can provide greater value to your business and your homeowners. Similar to the increasingly popular buy now, pay later solutions we see taking over retail, same-as-cash loans provide customers with a short-term, deferred-interest financing solution that can introduce flexibility to their budgets.