Contractors: How to Help More Customers Close the Financing Gap

Successful contractors specialize in various areas and operate in different marketplaces, yet they all share a critically important trait: they’re strongly committed to — or more frankly, they’re relentlessly obsessed with — closing the deal with as many customers as possible.

To do this, they develop and deliver targeted solutions that address their customers’ explicit requirements and implicit “pain points.” They also ensure that their sales and service delivery approach is consistently responsive and consultative, so that customers find the engagement satisfying and rewarding rather than stressful. There is another growing trend among the most successful businesses which allows them to serve a type of customer who has traditionally been left out of the mix: offering second look financing.

What is Second Look Financing?

Second look financing enables contractors to give customers with near or less-than-prime credit (which is nearly 50% of the population) the opportunity to finance their purchase, even though they don’t qualify for financing from a prime lender (e.g. Banks like Enerbank, Synchrony, Wells Fargo, Service Finance, etc.). This is because second look lenders look at multiple data sources to determine an individual’s credit worthiness- not just a FICO score. For example, at Fortiva Retail Credit, we use a proprietary model that is powered by over 20 years of lending experience to identify good customers who happen to have not-so-good credit.

Naturally, impaired credit customers face a higher total cost of borrowing than their prime credit counterparts, though having access to a solution at all when they’ve already been declined by another program confirms second look financing remains a valuable alternative for this population of consumers. The rewards of offering a second look financing program are also enticing to contractors. Here are some of the most compelling:

More Sales

The most important (and also the most obvious) advantage of second look financing is its ability to enables contractors to close more deals. True, they take a slight ding on their profit margins, though generating any amount of profit is always better than generating none at all, especially when considering the next advantage on the list.

Repeat Sales & Referrals

By onboarding more customers thanks to second look financing, contractors put themselves in a position to generate repeat sales (which may or may not require second look financing), and just as importantly, to receive word-of-mouth referrals from satisfied customers. Indeed, while advertising and marketing will always be important customer acquisition investments, nothing is as effective — or as profitable — as having a customer call, email, or stop by and say: “I was strongly recommended to you by….”. Fortiva Retail Credit offers your customer a line-of-credit product, meaning he or she may buy a $4,000 unit, yet have a $10,000 credit line, making it easy for them to come back and upgrade more products later, along with warranties, delivery and other services for as long as they have the account.

Stop the Competition

The services and solutions that contractors offer (e.g. HVAC systems) aren’t typically optional or auxiliary. As far as customers are concerned, they’re either absolutely essential and they needed it yesterday, or they’re very important and they want it ASAP. As such, contractors that don’t offer second look financing will lose customers to competitors that do — and those customers are unlikely to return at any point in the future. Once they’re off the radar screen, they’re usually gone for good.

Negotiate Better Deals with Suppliers

Since second look financing opens the door to serving a large segment of the customer population (all else being equal), contractors will purchase more supplies and more frequently as well. Both of these increase negotiating leverage, which translates into lower prices — and ultimately increases the profit margin on all deals for every customer type. A win-win across the board.

Improved Job Satisfaction

Last but certainly not least, because second look financing means that more deals close and more projects start, contractors and their teams enjoy greater job satisfaction. In the contracting world, nothing is as invigorating as a full schedule (actually, a small backlog is even nicer); just as nothing is as dismal as having to let people go and shrink operations, because there’s not enough work to go around. Having second look approvals keeps your books full and your commission checks growing.

Best Practices for Making Second Look Financing Work

At Fortiva Retail Credit, we provide second look financing to numerous contractors across the country, and have learned as much from them as we have from our own data and analysis about what works, and just as importantly- what doesn’t. Here are some of the best practices we’ve identified to help contractors like you establish more in their respective businesses:

  • Easy does it: the application process for customers must be easy and streamlined. Essentially, it should mirror the same process used by prime lenders. Fortiva is 100% paperless and can be accessed on a smartphone, tablet, online or even by phone.
  • The need for speed: the credit decision must be made extremely fast; i.e. within 60 seconds. The longer that customers must wait, the more uncomfortable they get. Make it instant!
  • Money talks: contractors need to get paid quickly, so they can apply for permits, get materials, assign workers, and take care of a variety of pre-project tasks. All of our payments are processed via ACH within 48 hours- no job completion paperwork required.
  • Paper is passé: customers loathe paperwork as much as contractors do. That’s why we’ve integrated our paperless system with leading vendor platforms, and can integrate with legacy systems as well. We also have four interface options: POS, Prime, Online and 3rd Party Application Portals.
  • Keep account: Our SAS-based reporting allows for robust reporting visibility so that contractors can identify trends and capture opportunities to increase customers, revenues and profits.

The Future is “Cool”

The outlook is sizzling for second look financing, because it effectively closes the gap for impaired credit customers who can’t get financing from a prime lender, yet don’t want to (and shouldn’t be forced to) come up with some other solution on their own. Fortiva Retail Credit is proud to announce an exciting new partnership with the ACCA and IE3 Media. Through this dynamic relationship, ACCA members will be invited to leverage our second look financing solution in their business to ultimately enjoy more sales, satisfaction and success! Stay tuned for special announcements in the near future.

Bob Maisel

Bob Maisel

RVP Business Development at Fortiva Financial
Bob Maisel is the RVP Business Development for Fortiva Financial.
Bob Maisel

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