How Contractors Can Benefit from Home Improvement Loans

Home improvement projects can be costly for homeowners. While some have the cash on hand to fund renovations, others need financing help. This is where home improvement loans come in

As a contractor, it can benefit your business when clients have access to financing. Offering financing solutions expands your customer base and helps land more jobs. Read on to learn all about home improvement loans and how they can boost your contractor business.

What Are Home Improvement Loans?

Home improvement loans are personal loans that borrowers use to fund home renovation projects. This financing is usually unsecured meaning borrowers don’t need home collateral to qualify.

Instead, lenders assess a borrower’s credit score, income, and debt-to-income ratio when approving home improvement loans. Approved borrowers get a lump sum of cash, which they repay in fixed monthly payments over a set repayment term.

Home improvement loans can fund all sorts of renovations, like:

• Kitchen and bathroom remodels
• Flooring installation
• Roof repairs
• Deck building
• Window replacement
• Landscaping
• Solar panel installation
• HVAC upgrades
• Plumbing and electrical work
• And more

Benefits for Contractors

Offering financing can benefit your contracting business in several ways:

1. Attract More Customers

When homeowners can finance home renovations, they don’t have to save up or drain their savings account. This makes big projects more affordable.

By offering financing, you make it easier for leads to become customers. People can get the bathroom remodel or kitchen upgrade they’ve been wanting without the huge upfront cost.

2. Close More Sales

Speaking of closing more sales, financing gives you a leg up over contractors that don’t offer this perk. If a customer is torn between contractors, financing could seal the deal.

Home improvement loans also help you land jobs when competing against DIYers. Some homeowners plan on DIYing until they learn they can finance your services.

3. Earn Customer Loyalty

When you offer financing, customers can only use those loan funds for your services. This earns you repeat business and referrals.

Happy financed customers know to come back to you for their next project. They also recommend you as a contractor that offers helpful financing options.

4. Get Paid Upfront

With home improvement loans, you get paid as soon as the project is complete, while the homeowner repays the loan over time. This benefits your cash flow.

How Home Improvement Loans Work

Home improvement loan programs designed for contractors involve three main parties – the homeowner, lender, and contractor. Here’s how it works:

• Step 1: The contractor informs homeowners that financing is available. If interested, the homeowner fills out a financing application with the lender.

• Step 2: The lender reviews the application and extends a loan offer if approved. The homeowner can choose a monthly payment plan that fits their budget.

• Step 3: Once the homeowner accepts the loan terms, the lender disburses the loan amount directly to the contractor’s business account.

• Step 4: The contractor completes the renovation project. The homeowner repays the loan amount through fixed monthly payments over a repayment term of 6 months to 7 years.

It’s that easy! The contractor gets paid upfront and the homeowner pays off the loan over time.

Offering Home Improvement Financing

If you want to offer financing, you’ll need to partner with a lending provider. Here are some top options to consider:

Lightstream

Lightstream offers home improvement loans from $5,000 to $100,000 with APRs as low as 7.49%. Contractors get paid upfront, usually within 1 business day of project completion.

Upstart

Upstart finances home improvements starting at $1,000. There are no fees and APRs start at 7.69%. Contractors receive payment within 1-3 days of the work being done.

Synchrony Financing

The Synchrony Contractor Financing Program provides installment loans and promotional financing. Contractors receive next day funding and dedicated support.

GreenSky

GreenSky offers loans from $2,000 to $65,000 for home improvement projects. Same day funding is available.

Wells Fargo

Wells Fargo finances home renovations from $2,500 to $50,000. Contractors get funded in as little as 5 business days.

LendingClub

LendingClub offers home improvement installment loans up to $100,000. Payment is sent to the contractor’s account once the project reaches completion.

Be sure to compare loan offerings from multiple lenders to find the best program for your business. Look at funding timelines, loan amounts, repayment terms, and any associated fees.

Tips for Offering Financing

Here are some tips to make financing part of your contracting business:

• Explain financing options to customers upfront so they can plan ahead.
• Use financing as a negotiation tactic to close more deals.
• Promote financing on your website, emails, brochures, and other marketing materials.
• Train sales staff on discussing financing with leads and customers.
• Add financing banners and badges to your website to advertise the option.
• Partner with multiple lenders to offer a wide range of loan products.
• Regularly evaluate lender programs to ensure they meet your business needs.

The Bottom Line

More and more contractors are realizing the benefits of offering financing. Home improvement loans help you attract more customers, seal more sales, foster loyalty, and get paid promptly upon project completion.

Research financing partners to find loan programs aligned with your business. Then start informing leads and customers that financing is available to make renovations more affordable. This can take your contracting business to the next level.