3 Things to Consider When Picking a Finance Program

By Rob Macklin, COO 1 & Fund 

Contractors agonize over picking the right pricing tool.  They debate the merits of iPads vs. Android for their presentations.  And don’t even get them started over which CRM is the best.   

But when it comes to financing, most of them just think of price Price PRICE!  Let’s talk about what’s really important in picking financing. 

Does it close sales and increase ticket price? 

Why do you even offer financing in the first place?  It’s to sell more product.  There is no other reason.  Embedded financing is a sales tool.  Period.  Full stop.  If your financing is not helping your sales team sell, ditch it.  It doesn’t matter how low the fees are, if it’s not helping you sell, it’s useless. 

So what do you look for in a finance program to help you sell more, and more often?  Two things: the terms of the loans, and the user experience in applying for and signing loans.  As for the loan terms, they need to be clean, clear, and easy to understand.  Your sales reps aren’t finance managers.  They need to know how to sell a few programs, and sell them well.  We usually recommend only giving reps three options – a low interest rate, a low payment, and a no interest option.  That’s it – don’t overcomplicate things.  Make sure those three programs are simple and easy, and you have the first part down. 

The second part – user experience – is a bit more complicated, but you know it when you see it.  The sales reps need access to a platform that allows them to easily submit an application, get a quick answer, and sign docs, all in one spot.  Ideally, that single application will be going to more than one lender.  If your reps are running multiple applications in the home, playing lender roulette, trying to find a lender to take the deal, do you think that’s a great customer experience?  Do you think that a customer is as likely to buy (or pay for upgrades, or a nicer product) in that scenario?  Your sales rep is fumbling around, trying to juggle multiple lenders, waiting to get an answer from one or the other, all the while making chit-chat with an increasingly frustrated customer?  One that’s becoming embarrassed because their credit wasn’t as good as they thought?  What a terrible experience!  But you can alleviate that by finding a financing program that allows your sales reps to… 

Be able to run second look financing easily in the home. 

Look, there’s no reason why your rep should have to submit an application twice.  It’s all the same information that first and second look lenders need.  Have a system or program where a first-look turndown is automatically sent to a second look lender, without the customer even knowing.  Give your customers with 600 credit scores the same experience as those with 800 credit scores.  Make sure they don’t need to fill out a second application – find a financing platform that automatically sends the application along to a second look lender. 

And you know what?  When this happens, your sales reps will close more deals.  Our data shows that, best case, 1st look financing turn-downs are run as 2nd look applications 52% of the time.  Best case.  That’s the gold standard for the industry that we’ve found.  We know the reps are supposed to run second look apps, but supposed to and actually do are very different things.  Take the work out of their hands and make sure all the second look apps are run that you can possibly run. 

If you have a system to automatically run second look apps, your sales closing average will increase. 

Can you change lenders without changing your process? 

Changing lenders is expensive.  Or, more accurately, changing your processes, is expensive.  If you go direct to a lender, using their portal, and need to change lenders, that means you’re pulling all of your reps back to the office for a day, and losing out of a day of sales.  That’s an expensive undertaking. 

But, if you find the right finance platform, you can change lenders on the bank end, and the rep – and customer – experience will stay constant.  No need to retrain reps when you change lenders.  That means you’re not beholden to any one lender, and can find the right lender program for you, regardless of how lenders might change over time. 

To sum up, notice that I didn’t mention price once.  If you only chase dealer fees, and don’t take into account those other factors, you’re missing out.  If you don’t believe me, do this math for yourself.  Figure out how much you’re financing, and add 1% (100 basis points) to your financing cost.  Then, figure out how much extra you’d make if your closing rate went up 3%.  I guarantee you that you’ll make more money with a higher closing rate. 

Remember, financing is a tool to close sales, nothing more.  As any good contractor knows, good tools are definitely worth it.