Financing?

Mike Finley

Anybody got the world by the tail in regards to financing customers projects?

I'd like to offer financing up to maybe $75K to clients and control the process from application to approval. I would need a partner that I submit the applications to and they fund the project. Of course I want a monetary reward (a cut) for the business we bring to them. Needs to be easy and fast.

Who's got a set up like that? I saw an advertisement for GE offering financing to contractors for their clients but I'm scared to call them because I figure it will all be BullSh*t once you get into the details with em.

Stone Mountain

I've been offering financing to clients for 2 seasons. I am unsure if I'm going to continue it. The finance company won't pay until the client signs off, and even then they have to talk directly to the client.
Problem is I don't see a penny until the job is done.

And, since you haven't had a draw and have no money from the job, they can hold it over your head to get freebies or extras.
And the sales person tends to forget to add 6% to the price to cover the cost of "free" financing.

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Mike Finley

DOH!

That is ugly in so many ways. That's like a construction loan for building a house it sounds like.

Okay, let's say that's the low bar, anybody got anything better than that?

dougchips

Mike, car dealers can get away with adding points to a banks rate we can't. This truth in lending/full disclosure BS prohibits this (or thats what I am being told). So making money off of the deal is more than likely out. Check out Wells Fargo or Key Bank, I do not promote GE since their application is just scary. Stay away from AGF and some of the other ones that run at 21%.

Stone, who talked you into bending over? You should not have to pay a penny unless you are using the 6 months no payment no interest type of plans for your clients.

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Cole

I would have dropped it after the first couple of jobs.

BTW- just out of curiosity, how many were using your financing offer?

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Mike Finley

I wonder about getting individual investors interested in something like this? Nice above average return with maybe a 4th () position on the deed of an over leveraged homeowners house?

Vinny

I know when I write this reply some of you guys out there will start to think I am some sort of recruiter for certified contractors network, But I am not. Just sharing my experience.

With that out of the way, at CCN they came up with a deal from a bank doing a same as cash offer where the bank underwrites a short term note with no payments for 90 days, up to a year. the contractor acts as a vendor and just basicly hands the phone to the client after you contact the bank rep and give a code. You can work this with or with out payments through out the job and still get 100% funding.

Of course they dont do this because thier nice guys and want to help contractors. They charge you the same as like a credit card transaction. So you want to use this in a sales presentation as a closing tool. i.e., " our competitors cant offer that, buy now pay then".

To cover that cost you need to geusstamate the number of clients that may use it, say half, then multiply that by your average job size and thats the amount of revenue that will be subject to the back charge. Then add that amount to your overhead figure when you do your annual buisness planning, keeping that figure right under credit card vender fees,
in your G&A, and this way it just becomes another part of your overhead structure that all clients will be paying for a little piece at at a time.

So, in that sense you are making money off it assuming you turn over all expenses in some sort of mark up. And, if done well, it will genereate more revenue from more closes and this will help pay for itself.

I can tell you we used it twice this year. We are still getting our sales act together and our typical buying cycle can take up to a year. But I know a few guys that have made a big splash using it.

There are other banks out there that do this sort of funding besides the one CCN uses.

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shed-n-deck

I've been trying for several weeks to get into contact with the financing service department at GE finance. She's called a few times, but has never emailed me like I requested. I have left her several messages asking her to contact me via email so if I can't take her call when she does happen to call, we can still get some information from her. It wouldn't be so bad if she answered her phone when I called. Anyhow, long story short, she won't email me, so I'm looking at other ideas.

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marc

Capital One is now doing the 90 day 6 month or 1 year same as cash. It wirks just like CCN's and you just make a phone call from the house, tell them who you are and hand the phone to the home owner. Takes about 10 minutes for a decision.
All of these companies that have been mentioned in this thread are for unsecured loans. Seems to me that if you're going to be doing 75K projects you will definately need secured funding. Best to deal with a local broker for this. They won't pay you but if you give them enough business they will throw some referrals your way. We use the 6 months same as cash and the 1 year same as cash all the time. Now is the time you will hear we are going to wait until spring. Now you can offer to do the project at todays prices and they don't have to pay until next fall. Works great. Not getting paid until the job is complete hurts at first but once you do a few you'll get used to it. We still try to get a third deposit and finance the rest but sometimes you have to finance the whole deal. One sure thing. If they are finance buyers they have to buy from you or another company willing to finance. When the ask how much this will cost you say between $250 and $400 per month. Sounds a lot better that $25,000 to $40,000.

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dirt diggler

Marc - who is taking out the loan - the contractor or the client (with the Cap 1 program)? I'm assuming the contractor

what is Cap One's manner in which they handle a client who won't allow a job to be completed?

Doesn't seem like you can be in total control (not that anyone ever is, right) - or, that's just the risk involved; take it or leave it

Tmrrptr

You got it
All those folks leaving northern rock over in jolly old england want someplace to put their money.
It's a cinch you won't be seeing any loonies, either.
r

dougchips

OMG, generally the client pays for their own job. The client takes out the loan since most contractors have bad credit. I think that we could agree that you would go broke if you borrowed money to pay for your own jobs.

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