• Financing That's Right on the Money

    April 1, 2010
    For a homeowner, the purchase of a heating or air-conditioning system is a big deal — selecting the right system can be a complex and expensive decision. When the contractor provides a quick and easy way for the homeowner to finance this purchase, it often relieves some of the stress and makes it that much easier to close the deal. It's a winning scenario for everyone in the HVACR supply chain.

    For a homeowner, the purchase of a heating or air-conditioning system is a big deal — selecting the right system can be a complex and expensive decision. When the contractor provides a quick and easy way for the homeowner to finance this purchase, it often relieves some of the stress and makes it that much easier to close the deal. It's a winning scenario for everyone in the HVACR supply chain.

    For HVACR dealers, GE Money's Sales Finance business has been an important partner in providing credit card and financial services for consumers. When credit is available, HVACR products and systems become more accessible for these consumers, allowing dealers to sell more products. That ultimately benefits the distributors as they move more products through the supply chain. GE Money's Home Improvement division, which encompasses loans for HVACR customers, has originated more than $15 billion in loans. Overall, GE Money's Sales Finance, part of General Electric Company's GE Capital division, has extended more than $146 billion of credit to 50 million consumers in the United States since January 2008.

    With a strong track record in home improvement lending and deep industry expertise, GE Money's Home Improvement division offers a range of promotions and payment options, including an unsecured, revolving line of credit that consumers can use for current and future projects. “Our focus is on traditional home improvement loans, primarily specialty loans that include HVACR,” says Bruce Christensen, vice president and general manager for GE Money's Home Improvement industry. Its focus, Christensen says, is on products, not remodels, particularly for items priced under $20,000.

    GE Money has made the process simple for HVACR dealers and their customers. At the point of sale, which is usually at the customer's home, the dealer can provide a credit application on the spot and call in the information to GE, making credit available immediately. “That enables HVACR dealers not only to have a contract for new equipment but also to have the financing already secured,” Christensen says. “It's easy for the consumer.” In addition to calling in credit applications, GE Money products allow for applications over the fax and through the Internet.

    While Christensen says it's difficult to ascertain whether the ease of credit actually creates more sales, the data show that the consumer who finances an HVACR purchase through dealer financing can spend about 20 percent more than the consumer who pays for the purchase with a credit card or cash. For dealers, a financing option means greater opportunities to upsell higher SEER levels. He notes the importance of financing, especially when one considers that HVACR purchases are often unplanned. When an air-conditioning system goes out in the middle of the summer, a homeowner has no choice but to replace it — and financing is very often the most attractive and available option.

    Because of its specialty in home improvement, GE Money has greater insights into the HVACR industry. Christensen says his division has strong relationships with most of the major HVACR manufacturers — Lenox, Bryant, Rheem, Nordyne and York — as well as with the wholesaler distributors, most notably Watsco. Because of the strong relationships between the manufacturers and GE Money, the manufacturers may pick up some of the costs of a credit promotion, making dealers more apt to participate and giving them a “bigger bang for your buck as it relates to their marketing dollars,” Christensen says.

    The Home Improvement division works with dealers through a combination of inside and field sales teams. Because its sole focus is on this market, the sales team and management involve themselves in all aspects of the HVACR industry, attending trade shows and serving on industry committees and working groups. “We don't want to be just in an industry; we want to be part of an industry. We do get very actively involved,” says Christensen.

    Both Christensen, who has been general manager of GE Money's Home Improvement division since 2002, and Jeff Shawd, vice president of Marketing for GE Money's Home Improvement division, are active in Harvard University's Joint Center for Housing Studies' Remodeling Futures Program. Christensen serves on the Joint Center for Housing Studies' Research Planning Committee. GE Money's Client Development Manager Bob Maisel works with HARDI. “If we want to understand how we can make it easier for our customers and the contractors, then we have to understand the industry,” he adds.

    In addition to working with industry groups and individuals throughout the HVACR supply chain, GE Money has sought out dealers through its Home Improvement Advisory Board, which it established in 2007. Bringing together 12 dealers from around the country who don't compete with one another was an opportunity “to glean information from them as to what's happening in their specific marketplaces and what types of trends they're seeing,” Christensen says. “We also wanted their feedback. What are we doing well? Where are the opportunity areas and what are your recommendations on how we can improve?”

    With new regulatory reforms set to take place under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, GE Money has been working to ensure that it complies with the new regulations. The regulations, the majority of which take effect this year, provide for improved transparency between credit card companies and consumers. Under the CARD Act, credit card companies must give consumers 45 days of notice if they plan to increase interest rates. They are also prohibited from retroactively increasing interest rates for cardholders in good standing with the company and from arbitrarily changing their agreement with cardholders. Cardholders have the right to cancel their credit cards and pay any outstanding balances once interest rates are increased.

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    With these new regulations in place, the Home Improvement Advisory Board has provided the Home Improvement divisions with valuable advice about what new financing programs and credit card programs will be most valuable for their customers in the future. ¡°What do your customers want when they can no longer have no-payment options?¡± Christensen asks. ¡°Are they looking for deferred interest? You guys tell us where we should be focusing our efforts in mobilizing the consumers.¡±

    Christensen refers to the members as GE Money's informal ¡°board of directors.¡± While he says the business has benefited greatly from their advice, it has also been helpful to the dealers themselves to share their best practices and war stories. Much like HVACR distributors who serve together on manufacturers' advisory councils, the dealers on the Home Improvement Advisory Board share their experiences openly and, from that, can improve their business practices. Shawd adds that the members now travel to each other's businesses ¡ª on their own dime ¡ª to see how they operate their businesses and how they can incorporate some of what their colleagues do into their own businesses. ¡°We're helping our contractors grow. We're helping distributors grow. Ultimately, it benefits the entire industry,¡± Shawd says.

    With these strong ties throughout the HVACR supply chain, GE Money has been able to withstand the effects of last year's recession and the downturn in the housing market. ¡°We've been financing in the home improvement space since 1988 and there's always been growth,¡± Christensen says. While he notes that every year brings its own challenges and opportunities, the sale of HVACR units is down due to the struggling economy. ¡°The great thing about this industry is that it's so big there is always opportunity.¡±

    Sales training remains an important component of what GE Money does for its HVACR dealers. The advisory board helps GE Money plan the types of training and education seminars that may be most beneficial for its dealers. ¡°What are the training initiatives that we should embark on? What should be a priority?¡± Shawd asks. ¡°They are really a great sounding board for us.¡±

    Ongoing sales training is important, says Christensen, because it helps keep dealers and their staff consistent in their sales efforts. Training opportunities may include webinars or face-to-face sessions with dealer sales staffs on a variety of sales-related issues, often having nothing to do with financing. ¡°We try to integrate financing into their sales process,¡± Shawd says. ¡°It's weaved right into their basic sales presentation and their sales process.¡±

    Christensen notes that GE is committed to green energy solutions and GE Money is a big supporter of energy-efficient HVACR products. GE Money enjoys a solid partnership with the Electric & Gas Industries Association, a non-profit organization dedicated to advancing energy efficiency and renewable energy solutions through a nationwide network of contractors, distributors, manufacturers and utility companies. GE Money also received GE's ¡°ecomagination¡± certification for financing energy-efficient home improvements.

    ¡°The biggest challenge that we see with energy efficiency is that alternate sources of the old way ¡ª coal and gas ¡ª are still less expensive,¡± Christensen says. ¡°And when you look at a lot of things like solar and geothermal, they are still very expensive and consumers don't see the returns as of yet.¡± But he says that GE Money is ¡°right there¡± to finance purchases and make these products more affordable for the consumer.

    Tom Peric¨@ is the editor of HVACR Distribution Business. Contact him at 856/874-0049 or [email protected].

    GE Money's Sales Finance at a Glance

    About: GE Money's Sales Finance, based in Kettering, Ohio, is a part of General Electric Company's GE Capital division (NYSE: GE), which has extended more than $146 billion of credit to some 50 million consumers in the United States since January 2008.

    Sales Finance provides credit card programs and financial services for consumers through dealers; national, regional and independent retailers; associations; contractors; manufacturers; health care practices; and service providers.

    Products: Home improvement is a key growth area for GE Money. With more than 20 years invested in the home improvement industry and $15 billion in loans originated, we provide deep industry expertise and a strong track record in home improvement lending. We offer a range of promotions and payment options, including an unsecured, revolving line of credit that may be used for current and future projects.

    These products are designed to meet the sales process by allowing phone-in, fax and Web-based applications. Every home project is unique, and we are focused on operating with speed and flexibility.

    Alliances: We're committed to strengthening the home improvement industry, as demonstrated by alliances with many organizations and associations; board and event involvement; ongoing marketing outreach; and our Home Improvement Advisory Board. We also earned GE's ¡°ecomagination¡± certification for financing energy-efficient home improvements.

    Industries: Sales Finance works with businesses in 20 industries including: home design and improvement, automotive, consumer electronics and appliances, elective health care, floor covering, home furnishings, jewelry, music, powersports, outdoor power equipment and sporting goods. More information can be found at www.gemoney.com, www.gecapital.com and www.twitter.com/gemoneyUS.

    Employees: Sales Finance employees support more than 100,000 businesses in offering promotional credit and extended financing to their consumer customers through more than 200 partnership programs. Expertise and comprehensive account support are provided in the areas of customer service, collections, payment processing, sales and client development, information technology, risk, marketing, finance and quality.

    Information: Businesses can visit www.gemoney.com/homeimprovement or call 866/209-4457 to learn more about financing solutions from GE Money.

    Media contact: Cristy Williams 678/518-2596 or [email protected]

    Best Practice

    ¡°One hundred percent of our business is residential and commercial heating and air-conditioning work, and about 60 percent of it is financed with one of our lending partners,¡± says Wade Sedgwick, president of Pronto Heating and Air Conditioning in Edina, Minn. ¡°Consumer financing is one of the most important aspects of our business. You have to provide customers with viable payment options. Otherwise, you will be missing sales opportunities every day.

    ¡°To anyone who is intimidated by consumer financing, I would suggest they start with one or two basic credit plans,¡± Sedgwick says. ¡°Do some role-play exercises with your sales team and practice filling out some credit applications. A one-hour meeting with your salespeople should be more than enough time to teach them everything they need to know to be successful using a credit program.¡±

    Sedgwick says most of his sales reps can close a deal with a single credit application sheet and a mobile phone in a matter of minutes. Those who carry a laptop can submit credit applications via the Internet.

    Now, more than ever, businesses need effective ways to energize sales, comply with lending requirements and monitor their success. GE Money brings these tools to its partners through its Web-based portal, Business Center. Introduced in July 2009, Business Center is a comprehensive suite of online tools that businesses can use to easily manage their credit programs, ensure compliance with new mandatory government regulations and better serve their customers. The portal enables HVACR dealer-partners to get connected 24/7, view daily sales and other reports, manage their financing program, and instantly submit credit applications online. It also gives them access to online sales training modules and marketing tools and support functions. All GE Money partners have password-protected access to the site.