The all-cash buyer has become a rarity in the world of contracting. Most homeowners either prefer or need to find financing of some sort to get started on a home improvement project.
Because of this, many contractors may find that offering their customers a financing option can boost business. When getting the right financing for a project is easy, saying yes to the home improvement is also a little easier.
According to HomeAdvisor, three-fourths of all home improvement projects are financed. If that figure seems a little high to you, it's most likely because the buyer who used home equity or a bank loan looks a lot like a cash buyer from a contractor's point of view.
But just because your customers are ready to pay for a project now, that doesn't mean they were a month ago. They most likely took out a home equity loan or a personal loan from a bank.
"Three-fourths of all home improvement projects are financed."
The home equity loan process can be a long one. According to the San Francisco Chronicle, an appraisal is typically needed, which can take anywhere from weeks to months, depending on the market. Even after the appraisal is conducted, the homeowner's income verified and the amount of accumulated equity evaluated, it could still take weeks for the loan to come through.
Personal loans can also be a challenge to obtain. A high credit score is typically needed to secure an affordable loan, or one with a lower interest rate. LoanNow wrote that a credit score of 700 or higher is typically required by major lenders. However, many Americans' scores fall just short of this. ValuePenguin reported the average credit score in 2016 was 695.
While credit scores have been getting higher in recent years (the average was just 687 in 2010), many people still find they need to continue improving their credit if they want to be considered for a personal loan.
Not only can getting a home equity or personal loan be a challenging process, but it may not be an attractive option for your customers. Home equity takes years to build up, and it can be a very valuable asset. Some people use it to supplement their retirement fund in later years or save it for a much-anticipated major purchase. Others just don't like to use their homes as collateral on a loan.
Personal loans have pitfalls of their own. High interest rates can make paying them off challenging. And being indebted to a bank isn't an attractive option for many people.
If your customers are turned off by these financing methods, they might decide not to pursue a home improvement project after all. But you can offer them something that helps change their minds - a financing plan.
Upon learning about your home improvement financing options that are convenient, attractive and affordable, your customers will be more likely to pursue their renovation. Plus, many contractors find that, once financing options are on the table, customers are more willing to opt for more expensive options or a more inclusive project.
However, it's best not to wait until they're in your store to let them know your financing options exist. Many times, already having financing in line is what brings them through your doors in the first place. To entice them to come to your store and get financing from you, it's important to advertise your options. Let potential customers know the financing programs you have available at your business.