Financing is often overlooked as a sales tool by contractors, despite its potential to make a project more appealing to homeowners. When a contractor presents a strong proposal, the homeowner may nod in agreement, but when the price is revealed, they often hesitate, saying “We need to think about it.”
This reaction can lead contractors to discount the price or add free upgrades, but a better approach might be to discuss payment options. Homeowners are not looking for a cheaper project, but rather a way to pay for it. Industry surveys show that many home improvement projects involve financing, and homeowners are comfortable with the idea of financing cars and appliances.
Financing as a Sales Tool
The key is to introduce financing as part of the initial proposal, rather than as a recovery play after the homeowner has said no. By presenting financing options upfront, contractors can help homeowners see the project as a manageable monthly payment rather than a large upfront cost.
For example, a $75,000 kitchen remodel might seem daunting, but financed over 15 years, it becomes a monthly payment of roughly $760.
This psychological shift can make a significant difference in the homeowner’s decision-making process. By reframing the cost as a monthly payment, contractors can make the project more appealing and increase the chances of closing the sale. To make financing a effective sales tool, contractors need to train their sales team to present it confidently, use financing partners that can approve a range of credit profiles, and be transparent about rates and terms.
Common Mistakes to Avoid
One common mistake is using a single lender with a narrow approval band, which can limit the options available to homeowners. Another mistake is failing to integrate financing into the sales presentation materials, which can make the financing option seem like an afterthought.
Perhaps the most damaging mistake is using financing as a discounting mechanism, which can eat into the contractor’s margin. A well-structured financing program can be a powerful tool for contractors, as it addresses the three main competitors: other builders, DIY approaches, and the option of not doing the project at all.
Those who are still on the fence about building out a financing program should consider that the cost of offering financing is generally smaller than the cost of losing leads to “We need to think about it.”