Consumer financing has been a staple in the retail industry for years. And now, Buy Now Pay Later (BNPL) options are transforming how service-based businesses approach sales. This article from United Consumer Financial Services, a trusted consumer financing partner for home improvement companies, explores the opportunities and challenges of offering financing in labor-intensive service sectors.
Read on to learn how offering affordable, accessible financing can improve homeowner engagement, boost project quote acceptance, and help you close more deals while improving cash flow.
The Rise of Consumer Financing in Service-Based Businesses
Access to flexible, affordable payment options has become standard for consumers, regardless of what they’re buying. Shoppers want, need, and expect payment flexibility at checkout, and these expectations have been transferred to service-based industries. Consumer purchasing and buying behaviors share similarities across sectors, with installment options a prime example: home improvement customers expect affordable payment plans similar to those available in online shopping and retail purchases.
Home improvement contractors, such as HVAC businesses, fencing contractors, driveway installation companies, electrical contractors, EV installation technicians, and gutter protection businesses, recognize the benefits of consumer financing, including the affordability and accessibility it provides to clients. Consumer financing for service-based companies is no longer a “nice perk” but a must-have, especially in these competitive markets.
Challenges and Hurdles with In-House Home Improvement Lending
All service-based businesses, including home improvement contractors, can benefit significantly from the opportunities afforded by consumer financing –– if they choose the right financing provider.
But when companies try to implement a consumer financing program in-house, settle for a one-size-fits-all approach, or place their trust in partners without adequate resources or experience, they will face significant challenges that negatively affect their reputation and revenue. We explore common challenges in home-improvement financing below:
- Service market lending hurdles: Unlike product-based retail, labor-intensive sectors face unique risks, including varying project scopes and completion timelines, client cancellations, and customer delays that impact revenue. The wrong approach to consumer financing exacerbates these service market lending hurdles, but the right partner creates affordable, accessible pathways to financing that expedites the lending process at every step.
- Compliance and regulation: Trades must ensure financing offers meet local and federal lending laws. United Consumer Financial Services employs a seasoned legal team to help every client maintain compliance, no matter where they do business across the U.S.
- Customer misunderstandings: Some homeowners may not fully grasp interest rates, repayment terms, or industry jargon. It’s crucial that your team effectively educates clients on their financing options. UCFS provides the one-on-one training you need to not only understand your financing program but also clearly communicate options to your most valuable assets: your clients.
- Cash flow management: Contractors need to balance quick payments with the timing of labor and materials expenses. Many service-based businesses attempt to implement an in-house financing program only to realize that the time, energy, and resources required significantly cut into profits. Additional overhead costs, the strain on team members, and resultant gaps in service and payment collection issues can be disastrous. Partnering with a financing firm that provides end-to-end loan management ensures your home improvement business reaps the benefit of secure, consistent cash flow –– a foundational element for any thriving business.
Without the resources and expertise of the right financing partner, service-based businesses are susceptible to the roadblocks above. But when you choose financing programs for labor-intensive sectors –– a financing partner with industry-specific expertise –– you increase accessibility, affordability, and revenue for your business.
How Consumer Financing Creates Opportunities for Home Improvement Businesses
POS credit in home services has transformed how contractors approach sales, from creating quotes to presenting estimates at a kitchen-table conversation to closing the deal. When financing is built directly into project sales, service-based businesses win with increased opportunities for revenue:
- Higher Quote Acceptance Rates: Financing helps overcome cost objections for projects like HVAC upgrades or EV charging station installs or solar power backup generators. For many homeowners, these projects are necessary and time-sensitive, but high upfront costs create obstacles to purchase. Straightforward financing reduces common barriers to entry, increasing project quote acceptance across client demographics.
- Increased Average Ticket Size: Homeowners are more likely to add upgrades or premium features when monthly payments are available. Consumer financing plans allow shoppers to add on to their purchases and projects for just a few dollars more per payment. Seamless homeowner payment plans help contractors increase average ticket sizes, earning more revenue with less resource spending to get there.
- Faster Project Approvals: Partnering with a consumer financing firm like UCFS facilitates faster client and project approvals. Our mobile-first approach to financing allows for application and credit approval in just minutes, providing project contractors with insights that help them move forward quickly. Real-time credit reduces delays caused by financing uncertainty to facilitate faster project approvals all year round.
- Competitive Differentiation: Offering monthly payment plans for trades help contractors stand out from competitors who only take upfront payments. Homeowners need payment flexibility for home projects, equipment, and services, and they seek out service-based businesses that provide convenient, affordable payment options. Offering payment plans helps companies to take a customer-centric approach that attracts more clients and creates value for the broadest array of consumers.
- Expanded Market Reach: Financing opens the door to reach customers who might not have the savings for large jobs or time-sensitive projects like EV charger installations, gutter protection and repair, or roofing services. When your financing partner offers high customer approval rates paired with realistic, affordable monthly payments, your business expands its market reach –– and its revenue.
- Expanding Sales Seasons: Many service-based businesses experience seasonal slumps. Consumer financing plans create affordable payment options that expand traditional sales seasons to year-round revenue opportunities. When homeowners can begin projects immediately and pay them off over time with a monthly payment plan, they’re much more likely to choose to start today instead of waiting months or even years until they feel financially “ready” to commit to your contract.
Implementing Conversion-Driving Financing for Your Service-Based Business
Providing consumer financing presents many opportunities and challenges for service-based businesses. But when you partner with United Consumer Financial Services, you expand your customer reach and revenue potential without the challenges associated with implementing your own in-house financing program. UCFS offers installment options for consultants and contractors that drive growth, supported by seasoned teams who help execute conversion-driving financing for labor-based businesses.
Financing is more than a payment option; it’s a sales tool. Adopting innovative, transparent financing from UCFS helps you compete in the evolving home services market. Becoming a merchant with us is simple; contact us to learn more about consumer financing for home improvement and service-based businesses, and how UCFS can facilitate your business’s growth today.
