staff The range of financial tools available to construction companies to increase cash flow is called contractor finance. These choices enable a contractor to postpone payment for expenditures or get advance payments.
Most contractors get their financing through lending network companies. It’s safe for them and their customers. It also helps them to close more sales. The customer can check offers quickly without impacting their credit score.
Increased Revenue
What is contractor financing? Contractor financing is a unique type of finance that uses the contract to underwrite the loan. It differs from other forms of finance, such as factoring and merchant cash advances, that require invoices or accounts receivable to qualify for the financing.
Contractors often experience a scenario where they present their bid to a homeowner, and the homeowner is shocked at the project cost. This leads to the homeowner scaling back the scope of work or deferring the project altogether.
Adding the option of financing to your business can help you close more projects. However, discussing their options requires more time with your customers. To help reduce the amount of time spent, most lender partners offer specialized regular training for your team and monthly data analytics.
Increased Customer Satisfaction
Offering contractor financing is a great way to increase the quality of your business’s projects. It can also help you increase the number of projects you close and improve your closing rates.
Customer satisfaction is a highly sought-after business metric influencing everything from sales growth to profit margins. However, achieving high levels of customer satisfaction requires more than just monitoring a single metric.
For example, a strong relationship exists between customer satisfaction and willingness to pay. Understanding this functional relationship is important for managers to understand the trade-off between aspired levels of customer satisfaction and the costs associated with delivering that level of satisfaction.
Reduced Cancellations
Because contractor loans rely less on traditional loan components like business profit and personal assets, they can be easier to qualify for than traditional term loans. They also tend to be short-term, structured to align with the contract timeline, and can help businesses avoid costly project delays or cancellations due to lack of financing. Some lenders even allow contractors to subsidize the cost of the loan through their lending partnerships, which can further lower interest rates for qualifying borrowers.
Increased Sales
When you can provide contractor financing for your customers, you can grow sales while allowing them to purchase a service that is right for their budget. This allows your customers to get the home improvement project they need done at a monthly cost that works for them.
This can help reduce customer cancellations as they no longer worry about securing the funds to complete their project. This can lead to a more positive experience for your customers, making them more likely to work with you again. This is especially true when you partner with a lender that offers easy qualification standards. Their approval process is typically based on contract terms, not personal income or assets.
