According to Bob Weickgenannt, president of Starcom Design/ Build in Columbia, Md., “If you want to give your customers the best service, you've got to have all the cards.” And, in the competitive remodeling market, your trump card may very well be your ability to offer financing.
Remodelers who offer financing use various sources. An increasing number are signing up with large banks or finance companies such as Wells Fargo, KeyBank, CapitalOne, and GE Money. Some also use alternate sources for customers with difficult credit.
Regardless of the source they use, all say that the availability of financing helps them sell more jobs for more money — in part, because they offer customers relatively quick gratification. “This is a highly competitive business. The longer it takes to get approval, the more likely it is that the client is going to shop around with other lenders,” according to Julie Joseforsky, president of KeyBank Mortgage. “There is some [urgency] to close quickly.” The remodeler can usually call in an application and get pre-approval in as little as a few minutes, and the money can be secured within 24 hours. That can keep a lot of buyers from slipping through your fingers.
Remodelers with experience offering financing are so sold on its value that they tend to trumpet it in their marketing materials, as well as on their Web sites. “We don't want money to be a stumbling block, so we mention the availability of financing in all our customer communications,” says John Murphy, president of Murphy Brothers Designers and Remodelers in Minneapolis. “We've heard from some customers that it's one of the reasons that they decided to call us.”
Presentation Anxiety But despite its obvious appeal, some salespeople balk at bringing up the subject. “Just because you have a [financing] program in place, doesn't mean your salespeople will be eager to present it,” says Mark Richardson, president of Case Handyman Services in Bethesda, Md., which uses a combination of large finance companies and local banks. “Many aren't comfortable in this arena even after going through training.”
Teaching salespeople how financing will help their bottom line should break down much of their resistance, but you may also have to show them that the process of selling it is relatively painless. Richardson, whose sales staff comes mainly from a design or construction background, says some worry that the customer will know a lot more about the subject than they do. The truth is that they might, but it doesn't matter. The salesperson need not be an expert on financing any more than he is an expert on plumbing; he just has to present what the company offers. However, contractors should make sure that the lenders they work with will field calls directly from homeowners who have technical questions about loan terms, interest rates, and other issues.
Having said this, remodelers and finance companies both suggest that salespeople should have a basic familiarity with the various aspects of project financing. “I recommend that [new salespeople] spend six hours learning about things like appraisals, interest rates, and construction draws. They should also be familiar with [real estate] comps in their area,” says Weickgenannt, who works with a local bank as well as a mortgage broker.
One advantage of dealing with a big finance company is that it may offer better training resources. Dave Anderson, regional sales manager for GE Money's sales finance unit, says he typically spends two to four hours on initial training and can make himself available for ongoing support.
Sales Basics There's no reason that integrating finance into your sales pitch shouldn't be relatively seamless. Weickgenannt talks to a prospect for 10 to 15 minutes to make sure they're a good match for his company, and then immediately introduces the financing option. “I ask how they want to pay. If they're looking into financing, I'll give them our options.”
In fact, remodelers and lenders alike recommend presenting financing as an option to everyone and quoting a monthly payment along with the job price. “Often a salesperson will assume that [an affluent] homeowner can just write a check to pay for the project,” Anderson says. But he adds that there's a difference between the ability to write the check and the desire. “Most people are payment buyers. More often than not, [the homeowners] will spend more money if they can make low monthly payments rather than taking the money out of their investments.”
He also tells salespeople to approach the subject in a matter-of-fact way. “Believing that a customer will be reluctant to discuss finances is 80% perceived on the part of the remodeler. Someone buying a TV at an electronics store doesn't flinch at giving household income.” If they do, some big lenders, such as GE Money, will put a link to an online application on the contractor's Web site, allowing the customer to fill out and submit at their leisure.
Once a homeowner has expressed interest in pursuing one of your financing sources, the next step is matching the borrower to the lender. Asking them a few questions about their credit history — such as their credit score, and if they have been denied a loan or filed for bankruptcy in the last few years — should tell you whether to send them to a first-tier lender or to an alternate source (see “Backup Bucks,” page S126).“To avoid frustration, we want to make sure the first person we introduce them to is the one who can come through with the financing,” says Murphy, whose lenders include US Mortgage, First Trust Mortgage, and Centennial Mortgage. “We ask questions to decide how they're positioned and which lender they should be working with.”
While it's important to let buyers know they can get quick approval, it's not a good idea to pressure them. Most full-service remodelers — who deal with relatively large sums of money, may be in the clients' home for a considerable length of time, and depend on referrals and repeat business — adjust their pace to that of the client. Allyn Harth of Harth Builders, Spring House, Pa., whose primary financing source is GE Money, says, “During the first meeting when we're talking about probable costs, we will ask if they have financing available. But we don't expect a quick decision. We soft sell it.”