A Good Financing Program is Like Money in the Bank

Sept. 1, 2007
By GARY SLAGLE img src="/images/archive/70960agood0100j_00000046380.jpg" width="133" height="200" border="0" align="right"Let's face it: your customers


Let's face it: your customers aren't always happy to see you. A visit from one of your service technicians often means that a heating or air conditioning unit is on the proverbial fritz. The customer is uncomfortable — either sweating or shivering — and wants the unit fixed right away. However, he or she knows that the solution may be expensive.

Unexpected expenses are awful, and everyone has them from time to time. These emergencies are common in the HVAC business. The nature of unexpected expenses means that some customers aren't prepared. They don't have enough money in their "rainy day" fund to cover a new heating or air conditioning system, and they may not want to use their credit card. What can you do to win their business and ease their pain?

The obvious answer is financing. Most HVAC contractors offer a financing program, and those who use their financing programs to their fullest extent are often among the most successful contractors in the business.

A Fact of Life
"Financing is a fact of life in this industry," notes Lisa Shaffer, customer care manager for Service Champions, Yorba Linda, CA. "The average ticket for a replacement unit with installation is about $7,500, which is a significant expense that many customers simply aren't prepared for."

Shaffer says that about half of Service Champions' customers take advantage of the company's financing program. The company, which had nearly $13 million in sales revenue in 2006, works with three different lenders to offer a variety of financing options.

Some dealers choose to offer financing through a manufacturer, as well as have a program that can span a range of brands. Mark Duncan, the controller for Mendel Plumbing and Heating, St. Charles, IL, decided last year to initiate an in-house program with a leading consumer financial services company. He says the program has been a success: support from the financial services company is good, and it gives his company a versatile, marketable sales tool.

"The program is easy for us and for the customer," says Duncan, whose company has 50 employees and a fleet of 40 service trucks. "Offering easy financing removes a lot of the financial distress of having to replace a unit. Our financing program has been very well received."

Duncan notes that for a financing program to be truly successful, it must be easy to implement.

"We wanted a program that had minimal paperwork and an easy application process," says Duncan. His company found what it wanted, he adds. "Very little training was required for our technicians to feel comfortable using it. It's a one-page application process, and the response time is very brief, typically only a few minutes."

Service Champions' Shaffer agrees that simplicity is a key element to look for when choosing a financing partner. "I do the (finance) training myself," she says. "The process is pretty simple, and I give our service technicians a reference card with information and the phone numbers they need. In most cases the credit decision is immediate, and comes while the technician is still with the customer."

Shaffer noted that the approval rate is high, around 70%. Once the application is approved, Service Champions fills out a sales form and submits it to the lending institution. The money for the sales transaction is deposited directly into the company's account. This helps ease cash flow issues that can cripple some contractors.

Marketing Muscle
A sometimes overlooked benefit of consumer financing is the marketing muscle it adds to your company. Available money can be a powerful motivating tool to consumers. Savvy contractors use financing to help drive sales and separate themselves from their competitors.

"We often highlight financing in our newspaper ads," says Duncan. "We feel that our financing program is one of the benefits of working with our company. It's a great service to our customers, and helps distinguish us from our competitors who don't offer financing. It's definitely a competitive advantage."

Duncan adds that Mendel Plumbing and Heating frequently offers incentives such as 90 days "deferred interest" or even longer promotions, some up to 12 months.

Service Champions also has interestdeferred offers, but uses them very judiciously. "We have a 90 days no-interest program. We also can offer six months or even a year with deferred interest, but we typically don't offer them unless the customer really needs the extra time," says Shaffer. "The customer doesn't have to make any payments until the deferred interest period expires, unless they choose to make a payment. But we always caution them that if they cannot pay off the amount at the end of the promotion period, the interest goes back to day one. So, to avoid any interest charges, they must be prepared to pay the balance."

For customers who may have trouble paying a balloon payment, Service Champions offers a revolving credit program, complete with a credit card. The customer is required to pay a minimum of 2% of the total project cost each month, and they can pay the total amount at any time with no early payoff penalty.

Benefits for Your Company
Consumer financing programs benefit contractors in numerous ways. First and foremost, they make it possible to make more sales, even with customers who are facing unexpected and unplanned needs. If a customer can't get financing with you, chances are they'll go to your competitor.

A financing program backed by a reputable lender also helps ease cash flow issues for the contractor. And financing can be a nice marketing tool that will set you apart from other HVAC dealers.

In addition to the marketing and sales advantages of a consumer financing program, think of it as an important element of your customer service effort. Consumers sometimes find themselves faced with the absolute need for a new heating or AC unit, but they may not have the cash, or credit, to pay for it. You step in as the hero, providing HVAC service and a financial solution. They get the service they need and you record a sale, and a happy customer that will refer you to their friends and neighbors.

Gary W. Slagle is vice president and general manager, Home Utility, GE Money – Sales Finance. He has more than 30 years experience in all aspects of consumer financing, primarily with GE. GE Money is a $190 billion global consumer financial services company. Slagle can be reached at 800/244-7354. For more information, visit