Galaxie Home Remodeling, in Chicago, has always offered financing. “We are full-service and that is part of being full-service for us,” says president Bruce Pinsler. But the process has changed dramatically in the past few years. When remodeling and the economy were going strong, about 70% of customers used the company’s financing. Now it’s about 40%.
“The margins are so small now,” Pinsler says, that financing is no longer the income-generator for the company that it once was.
Wells Fargo, one of the banks that the remodeler works with, offers incentive financing with interest-free loans for one or two years for clients who qualify. “The [bank] charges us a fee [3% to 4% of the loan amount] like a credit card fee,” Pinsler says. “We pay the fee to get loans for our customers.”
Working With the Banks
Galaxie sales staff are trained to bring up financing with clients early on, letting them know that loans require good credit. The company’s credit manager helps salespeople answer any technical questions and keeps them apprised of any financing changes.
Galaxie’s staff deal directly with the banks. They generate the paperwork from the bank website; bring the paperwork to the client to sign; and take the signed papers to the bank for approval. At the end of a job, the foreman fills out a document of completion. Once the bank receives that form, it calls the clients to make sure theyre satisfied with the job, then wires funds to Galaxie’s account or sends the company a check.
For 20 years Galaxie has been an approved contractor for the local South Central Bank, which allows customers without equity but with good credit (a credit score in the high 600s) to use a Federal Housing Administration loan to borrow up to $25,000 toward a renovation. “Most of these [loans] are in the $10,000 to $25,000 range for replacing roofs or windows,” Pinsler says. For those with above-average credit, the loan can increase up to $50,000.
—Nina Patel, senior editor, REMODELING.