How Financing Can Help Your Firm, and Your Clients

Are you in the finance business? As kitchen and bath dealers, you probably don’t consider yourself to be in that business. However, whether we like it or not, we in this industry are, in fact, in the finance business. Think about it: we have deposits for the projects we sell, and we need to collect money at different stages of the projects we do. But, obviously, the most important thing is that we must collect the final bill when it’s due. As with our company, I’m sure you sometimes have a difficult time collecting money owed to you for a variety of reasons. That, in itself, puts us in the finance business.

An Offer They Can’t Refuse
Let’s take this another step forward. Does your company offer clients financing? If not, why? Maybe you think it’s too much work, or maybe you think it’s too hard to get the proper information. Maybe you’ve never considered it as part of what you should be offering your customers.

For years the remodeling industry has been in the finance business. The siding and windows companies use this for selling their products. The pool industry uses this for selling pools. And certainly the automobile industry has used financing as a major source for selling automobiles for as long as I can remember. So why do we as kitchen and bath companies not offer this service to our customers? I believe the reason is a lack of understanding about the true benefits of offering this opportunity to our clients.

Going back a few years I recall a few projects that I felt certain I had sold, only to find that they made the purchase from another company because they took care of the whole package, including the financing.

Once I had a customer who told me they were going to buy from me, but he now needed to go to his bank to arrange for the financing. He needed all of the plans, the agreement, and all of the documentation for the bank to put the loan together. So we gave him everything that he told me he needed.

After a few weeks had passed, I called my customer. He told me that he went to his banker with all of the information. The banker examined everything, but thought that the price was pretty high. He asked my client if he had any other bids. My client told him my firm came as a strong referral, and that he was very happy with everything my firm had done. But then the banker told him that he knew of a kitchen firm that with which the bank worked all of the time. The banker suggested that just for his own benefit he should talk to this company, and at least get a bid on the plans that he had so he can decide if there is any difference.

To make a long story short my client – or who I thought was my client – received a bid that was less than my firm’s bid. He did not see any difference, and since the banker said he would get the loan easier if he worked with the company with which the bank had a relationship, he went with the other kitchen company. Since that time I have never given all of my information to a customer to take somewhere else without paying me first for the information. I lost that job not because I did anything wrong, but because the banker told the client to get a bid from his contact.

Another time, after we’d finished a very nice kitchen, the salesperson asked me to go out on the final with him. He had told me the customer was complaining about everything, and when we arrived to the job site, the first thing I saw was yellow self stick dots all over the cabinets. The customer proceeded to show me what he considered defects in the wood.

After about five minutes of looking at all the dots, I determined that something else was happening. I asked the customer to tell me what the real problem was since there was nothing wrong with the cabinets, or with anything else he’d brought to our attention. He finally said that they had run out of money. We worked out a repayment plan with interest to pay off the final deposit. It took about six months, but they paid it all. Had we financed this project, this would not have been a problem for him or us.

Building It In
Today we offer financing as a part of our business model. We started with a local bank, and then we graduated to a specific finance company for the kitchen and bath industry. We also offer a credit-card-type of finance plan that actually pays us when a customer uses it to finance their project.

On all of our bids, we have a monthly investment amount so the customers can see what the payment would be if they financed the project with us. This usually gets their attention and makes them ask about the number.

We use the most extended time, which is usually 25 years or 300 months. The reality is that 93% of homeowners that make a major purchase like a car or remodeling project use someone else’s money. Few of us have this kind of money sitting around, and if it’s in an account that’s working for us, it’s usually better to leave it there and fund a project like this with other money. The benefit of getting a possible write-off for the interest paid can, in most cases, be a good thing.

Unfortunately, kitchen and bath designers face so many issues in the design of a kitchen or bath, they just don’t want to get involved with one more thing that will add time to the process.

A lot of this problem can be solved by properly qualifying prospects up front. After all, how many of us have spent countless hours with a non-buyer?

Whether you work with a local bank, of a company that specializes in financing, you owe it to your customer and yourself to make this a part of your business model.

Many financial companies are looking to do business with remodeling companies because they want the opportunity to sell the customer a refinance of their existing mortgage. When they include a new kitchen or bath, this just helps the customer get a fixed payment for a long term. After all, a new kitchen or bath is a long-term investment, so why not offer this to your customer? One of the real benefits here is the guarantee that you will be paid for the project.

How It's Done
When we do a finance job, the checks are made out to both our company and the homeowners. We get the deposits that work for us, and we have the control over the deposits. In some cases, we have the checks sent to us, and we only need to get the homeowners’ signature on them.

In some cases the homeowners may sign all of the checks over at one time because they’re not going to be in town, or they simply don’t want to mess with them.

Most of the loans we do are second or third positions. If your customer has great credit, they will get better rates. If the credit is not so good, believe me, they know it, and they are happy to get any loan at most any rate.

We’ve found that the best thing for us to do is to not get involved with any more than having the customer fill out a loan application. It’s then faxed to the finance company, and, generally, within 24 hours an approval comes back to us. Someone else takes care of the closing and obtaining all the necessary information the client needs to submit.

We normally will ask for more money than we think will be needed, and most customers are surprised that they’ve been approved for the amount that we requested.

What this really does is allow them to purchase that commercial-style range or granite-topped island they initially didn’t think they could afford.

In many cases they can even get more money than needed for furniture in the kitchen, or for other decorating. What started as just a kitchen remodel turned into a complete new room including windows and siding. While there are many different ways to work the numbers, the most important thing is to have this option in your box of sales tools.

For instance, I know about one firm where each salesperson must obtain a completed finance application before he/she will spend any length of time talking about the design or pricing. This firm wants to be sure that customers know that they have more money available than they thought. It also wants to be sure that this is a good lead that can be closed. This certainly helps sell these customers.

The bottom line is you should not be afraid to discuss financing options with your prospects. They know their projects will cost a substantial amount of money.

Therefore, it’s in your firm’s best interest, as well as theirs, to help them find a way to pay for their projects.

Thompson Price, CKD, CBD, CR, has worked in the remodeling industry since 1971. He’s been an NKBA national board member and educator. Today, he’s the co-owner/president of St. Louis, MO-based Callier & Thompson, and is the v.p./membership for Houston, TX-based Bath & Kitchen Buying Group. He was a key part of the formation and development of BKBG in 1993. Members of the BKBG address business strategies for kitchen and bath dealers in a regular bi-monthly column, appearing exclusively in Kitchen & Bath Design News.