Why You Should Be Offering Financing To Every Customer
The cooling season is upon us and your clients (and potential clients) will want to ensure their HVAC systems are up to par. Whether their current system has gone kaput, or they simply need an upgrade, one way to get more customers through the door is by offering financing.
While the cost of systems years ago did not merit it, and interest rates made financing options unattractive, this is certainly no longer the case.
These days, energy efficiency concerns, and EPA codes mean HAVC systems cost less to operate, but significantly more to purchase and install.It wasn’t that long ago that a couple thousand dollars would have done the job. Today however, technological innovations, and weatherizing the home mean purchasing and installing a new HVAC system can cost $12,000 or more.
The great news is, your customers make that back and more in energy efficiency savings, and financing options with great interest rates make it affordable. Greater affordability for your customers means more sales for your company.
FINANCING OPTIONS FOR SMALL TO MID-SIZED CONTRACTORS
While some larger contractors handle their own financing plans, this is often not a viable option for small to mid-sized operations, but forming partnerships with lending institutions such as banks and credit unions, or even the manufacturers of the units you install allows you to offer your customers financing with virtually no risk or cost to your company. Washington-based company Sunset Air has partnered with a local credit union for the past five years to offer their customers financing at a very competitive rate, and sales are up 20 % as a result.
“We…started putting feelers out to see what lenders were offering,” Residential Division Manager Randy Norris said. “We wanted to know how competitive their interest rates were and how easy their paper work was, because whatever they were offering had to be in our customers’ best interest,”
The key is that the lending institution will be providing the financing, but your company will be handling the paperwork required to get your clients signed up and approved for their loan.
This means training your staff. Sunset Air has a staff member dedicated to handing their financing – ensuring all of the “i’s are dotted and the t’s crossed” – before the paperwork is handed over to the lender, but all staff members are trained for the process.
“Everyone – from the original estimator who does the proposal, to our sales staff – has to understand the process and know how to complete the documents, and we actually bring one of our lender’s loans officers into our sales meetings from time to time for a full review,” Norris said. “Our sales staff have forms with them when they close the sale, and if financing is the direction the customer is going, they will get all of the documents completed and bring them back to the office.
Sunset Air then sends that paperwork off to the lender and within four hours they’ll have an approval or a denial.
“That’s our process, and it works really well for us,” Norris said.And notmuch promotion is needed. It’s as simple as having the sales team ask customers if they’d be interested in financing. Not asking that question could potentially mean losing thesale.
Customers often follow up with a question like: “what kind of interest rates do you offer?”
For about 80 to 90% of Sunset Air’s customers, that rate is about 3.9%, and varies depending on the systems installed and the customer’s credit score.
PREPARING CUSTOMERS FOR THE PROCESS
To help your customers prepare for the approval process and ensure they qualify for the best interest rate possible, there are a few steps they should take.
They should check their credit score to ensure the accounts reflected are all current and that where possible, they can reduce their debt to income ratio. In cases where the accounts reflected are not current, have them contact the major credit bureaus with the proof needed to update them.
Proof of employment is vital; so ask them to collect their last three pay slips. Self-employed clients can show proof of income by supplying bank statements that show deposits into their account, or copies of their taxes from the past year. Cosigners need to provide the same.
Customers with little to no credit will unlikely qualify for the lowest possible interest rate from the lender. However, having them provide reference letters from employers, organizations with whom they have a financial history, or even utility companies that can attest to their bills being current could help them qualify for a better rate.
Working with a lender to offer your customers financing is a win-win situation for the small to mid-sized contractor, make that a win-win-win situation, because all three parties involved will benefit.
Customers are able to have the best, most efficient system for their needs installed at an affordable price. The contractor generates more business for the lender they partner with, and little to no leg work is required by the lender to get those additional customers through the door. Finally, you, the contractor will likely expand your customer base. The more people can afford your equipment and services, the more sales your company will make. And sales will likely get a further boost from referrals.
So, begin to investigate the options available in your locality. Work on forging relationships with lenders to find out who offers the best deal for you and your customers. Once you decide on a lender, streamline the new relationship to ensure each transaction works as smoothly as possible for all parties involved, and ensure your staff members are all on board with, and understand the process. Finally spread the word to your customers and be prepared for your company to grow as your sales increase.
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