POS Financing for home improvement businesses guide, Property interior design renewal, Property refurb advice
POS Financing: A Competitive Advantage for Home Improvement Businesses
26 July 2024
Home improvement contractors are increasingly needing to think outside the box when it comes to client acquisition marketing. How can you secure more projects? What about larger-scope projects?
Well, the reality is that many homeowners shy away from home improvements because of the cost. But what if you could turn this into an advantage? With home improvement point-of-sale financing, you can.
Below, we’ll discuss what home improvement financing is, how you can implement it into your business plan, and how it contributes to improved client acquisition, satisfaction, and revenue.
The Home Improvement Market Landscape
The home improvement market in the United States is currently valued at $432 billion. By 2032, it is expected to grow by 4.8% to nearly $650 billion. These numbers come as no surprise since over half of homeowners in the U.S. undertook a home improvement project in the past year.
However, with over 780,000 contracting businesses in the U.S., how does your company stand out and attract clients? The answer lies in home improvement financing, which allows your clients to start their projects immediately with the flexibility to pay over time in small increments.
Understanding POS Financing
The average median spend on a home renovation project in 2023 was $24,000. Most homeowners need time to pay back that amount.
Contractors who offer home improvement financing cut make it possible for the customer to pay off the project over months or even years. And if the contractor uses a third-party financing company, they can get their money at job completion.
Here’s how it works:
- After consulting with your client and giving them an estimate for the project, you can offer them a financing option to make it easier to pay for the services.
- Your client will need to provide some financial and project-related information to start their application.
- Direct lenders in the home improvement sector will review the client’s application for financing. If approved, the lenders will present several home improvement financing offers that your client can choose from.
- Once the client chooses a financing option and finalizes their loan with the lender, you’ll receive the funds directly, usually at milestones or at job completion.
- You can start the project immediately. Your client will pay the lender directly with an installment plan.
Home improvement financing means easier payment options for homeowners, higher-cost project commitments, and increased revenue. By offering your clients a financing option, your business becomes a one-stop service provider. You’re not only providing quality renovation services, but you’re also giving your clients an easier way to finance it.
Given this convenience, customers are more likely to work with a business that provides top-tier services with affordable payment options in one place.
Benefits of POS Financing for Home Improvement Businesses
Home improvement financing gives your clients a better way to pay for renovations. But what’s in it for your business? Here are some of the top benefits contractors receive when they start offering financing options:
Increased Sales and Revenue
When the cost of a home improvement project is broken into smaller installments, homeowners are more likely to commit to making the renovations. This means you’ll be able to secure more larger-scale projects, translating into higher sales and revenue.
Enhanced Customer Satisfaction and Loyalty
Increasingly, clients are looking for one-stop solutions, especially when it comes to big projects like home renovations. They want a contractor who does it all – fast, quality results at affordable rates.
When you offer it all, your business is checking all the boxes of great customer service. As a result, your clients are more likely to return when they have future projects, as well as recommend your services to others in their network.
Simplified Payment Processes
Offering home improvement financing is easier than you think. The lender will handle all the eligibility checks, disbursements, and repayments. You don’t have to worry about a thing.
If your client is approved for a loan, you’ll typically see the funds for the project in a few days. You don’t even have to worry about repayments – the client will pay the lender directly.
But how does financing simplify the payment process for your clients? The number one benefit is that they don’t have to pay the full project cost upfront. This significantly reduces the financial burden of home renovations.
Second, the lender will set up a payment plan with them. Typically, a portion of the principal and interest will be automatically deducted from their bank account every month. So, they can set up repayments and forget about it.
Challenges and Risks
The benefits of home improvement financing are many. However, there are some notable risks and challenges that are worth considering before you implement financing in your business model:
- In-house home improvement financing likely isn’t the best option. This would require you to conduct eligibility and credit checks, disburse the funds, and handle repayments. Your company would also be responsible for complying with state and federal lending regulations.
- Working with unlicensed and unregulated lenders puts you and your clients at risk of federal and state non-compliance. It can also expose your clients to predatory lending tactics.
- Similarly, lenders who don’t cater to the home improvement sector or your clients’ credit portfolios can lower the number of homeowners who qualify.
- Borrowers must be presented with clear and transparent loan terms. Failing to provide them with clear information can reduce their trust in your company.
- Lengthy application processes that require in-depth information can present more of a hassle for clients, leading to lower adoption rates.
Implementing POS Financing in Your Home Improvement Business
If you’re ready to start offering home renovation financing to your clients, the most important decision is the software-as-a-service (SaaS) provider you choose to partner with. The SaaS provider will host the financing software on your behalf and maintain lender relationships.
When looking for a SaaS provider to partner with, make sure they have all or most of the following features:
- Offers Easy Integrations: The software should easily integrate into your existing workflows, including your website and quote process. Your clients should be able to request financing online and in person with a hassle-free digital solution.
- Provides a Digital Request Platform: The SaaS provider should offer a digital solution for your clients to request financing independently. It should be intuitive, easy to navigate, and quickly integrated into your website. With a few clicks and a little information, your clients should be able to request home improvement financing and see results.
- Partners with a Large, Reputable Network of Financial Institutions: Work with a provider that already has partnerships with reputable financing companies that specialize in home improvement. The larger the network, the more financing opportunities your clients can explore. This often translates into higher success rates of finding a suitable loan.
- Has Industry-Specific Solutions: Along with a large and reputable lender list, the SaaS providers network should also cater specifically to the home improvement sector. This means offering loans tailored for home renovations.
- Offers Multiple Financing Options and Competitive Rates: The best way to cater to your clients’ financial needs is to partner with a provider that offers multiple financing options, promotions, and rates. The more options to explore, the more likely your clients are to find a flexible solution that works for their home improvement budget.
- Caters to Diverse Credit Profiles: Financing companies in the SaaS providers network should also be willing to work with borrowers with diverse credit profiles. A network that accommodates subprime and super prime borrowers increases the likelihood that your clients are approved for home improvement loans.
- Provides On-Screen Pre-Qualifications: Your clients shouldn’t have to jump through hoops or wait for financing. The SaaS provider’s request platform should provide on-screen pre-qualification results in minutes, which can cut down the time between securing financing and starting the project.
POS Financing for home improvement Conclusion
To stand out in a crowded home improvement market, your business needs to be a step above. And that doesn’t just mean going above and beyond for high-quality services. It means catering to your clients’ financial needs, as well.
Implement a home improvement financing option and take your business to the next level.
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