In the home improvement industry, a common myth persists that if a customer finances a home improvement project through a third-party lender, it will take an extended period of time for the contractor to receive payment compared to direct payments from the homeowner. The good news is that this is generally a myth. So, let’s dive into it and separate fact from fiction.
Most of the confusion surrounding extended payment windows and why this myth is so prevalent is because many misunderstand how third-party financing works. In home improvement, this customer financing option involves a financial institution that provides funds to the homeowner, which are then used to pay for the project. Once the project is complete, the contractor receives full payment from the lender, while the homeowner pays the lender in monthly installments.
In reality, the payment timeline for contractors under third-party financing agreements is often similar to that of direct payment scenarios. Once the homeowner completes and approves the work, the contractor submits an invoice to the homeowner or directly to the lender, depending on the arrangement. Payment is then processed according to the agreed-upon schedule, usually within a standard 30- to 60-day window. When contractors partner with Salal Dealer Direct lending, once the project’s completion certificate is signed, contractor partners receive payment in as little as two business days.
However, several factors can influence the speed of payment to a contractor when a customer uses third-party lending, such as:
Efficiency of Lender Processing:
Some lenders may process payments faster than others. Contractors should familiarize themselves with the lender’s payment process beforehand.
Project Completion and Approval:
Delays in project completion or disputes over the quality of work can delay payment. Prompt and satisfactory completion of work is essential.
Communication:
Clear communication between the homeowner, contractor, and lender is crucial. Misunderstandings or lack of information can lead to payment delays.
Although the belief that third-party financing invariably leads to delayed payments is a myth, many contractors remain apprehensive about working with third-party lenders. While there can be variations based on individual lenders and specific contract terms, the payment process in financed home improvement projects does not inherently involve extended delays, and the benefits of offering customer financing often outweigh the negatives. To successfully utilize customer financing to grow their businesses, contractors should ensure clear communication and understanding of the financing terms and work towards maintaining a good relationship with both the homeowner and their customer financing partner. This approach will help in facilitating a smooth payment process.
Are you ready to grow your home improvement company with customer financing?
Partner Forward with Salal Dealer Direct
We team up with contractors nationwide to provide their customers with affordable financing for various solar and home improvement projects.
We can offer some of the most competitive rates and dealer fees because we’re part of a member-owned credit union. That means our profits return to our members—and business partners—through lower rates and fewer fees.
Our Dealer Direct Financing programs feature:
- An online loan application with fast credit decisions and a high approval rate.
- Terms and loan amounts are available to fit various budgets and project sizes.
- Partners pay ZERO dealer fees on our standard program.
How to Start Offering Salal Dealer Financing to Customers
We’re serious about helping your business grow with fast funding times and personalized support from a dedicated and experienced team of lending specialists. To get started, our dealer application process requires these documents:
- Completed dealer questionnaire
- Current income statement and balance sheet
- Copy of business license and/or contractor’s license
Disclosure: Salal does not provide legal advice. Businesses should contact their own legal representative for any questions.
