Business Smarts: Offering Financing for Clients - The Edge from the National Association of Landscape Professionals

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Business Smarts: Offering Financing for Clients

Oftentimes when a consumer is making a sizable purchase for a house, a car or other investment, they look for financing to help make the cost more manageable.

Yet frequently, landscaping companies opt not to offer their customers any financing options, believing this is best left to the banks to handle. However, offering financing has benefits for both landscape company owners and clients.

Financing Options

Steven Salomon, president of Centerpoint Landscaping Services Inc., based in Henderson, Nevada, says they have been offering financing to clients for 10 years. Centerpoint Landscaping Services works with Green Sky, Wells Fargo and Lyon Financial.

Salomon says about 25 percent of their customer base takes advantage of the financing they offer. He says most go with a low APR eight- to 10-year loan that is four to nine percent depending on their credit score. 

“The terms with the banks are reasonable but there is a little more delay than a client paying check or cash,” he says. “We are a healthy landscape company so we can float the delay a little bit with our financing clients.”

Alpine Gardens, based in Fort Collins, Colorado, partnered with a company called LightStream.

“We essentially work to simply refer our client to LightStream, who then handles all the details,” Nate Fetig, general manager and vice president of Alpine Gardens. “We understand that landscaping projects do not fit neatly into categories that many lenders use and can make it tough to get approval. LightStream seems to understand that segment and offers what seems to be competitive rates and terms for our clients.”

LightStream offers an assortment of terms and rates from as little as 36 months to 20 years depending on the needs of the client. Fetig says their cash flow isn’t impacted in any way as the loan is funded directly to the client and they pay Alpine Gardens like with any other project.

Fetig says they’ve offered financing to clients for five years but so far only a few customers have taken advantage of the program. Despite this, he says there’s little incentive for them to not offer financing.

“Once we signed up as a partner with the consumer financing company we essentially have nothing to do with it aside from an occasional update of terms on our website,” Fetig says. “It is something that costs our company nothing and can serve to eliminate one barrier to purchase for our clients.”

Benefits for Contractors

Some of the main benefits of offering financing are the ability to increase your potential customer base and to get an edge on the competition. You might have far more potential clients you can reach once they realize they have a choice in the payment options.

Also, because such a small percentage of landscape companies currently offer third-party financing, this could be another factor that helps set your business apart from others in the area who are charging a similar price. Fetig says that for the few customers who have taken advantage of the financing they offer, it helped them close deals that might not have otherwise.

According to Enerbank.com, not only does offering financing help with your close rate, but homeowners who choose to finance spend 43.8 percent more on their home improvement projects.

“We offer financing to help clients achieve their dream landscape all in one sitting instead of phases,” Salomon says. “This way they get to enjoy the space right away while paying for it in smaller payments over time.”

Benefits for Clients

By offering clients the flexibility of financing they are able to purchase the landscape project when they want rather than having to downsize the scope of the project or span it out over a number of years in affordable chunks.

“Our service is one that comes at a significant cost, that not all our clients can pay for out of pocket,” Fetig says. “We had heard from many of our clients that they were working on getting financing and so we wanted to be able to help direct them to a source for funding their project and remove that barrier.”

Many third-party financing companies can approve a client relatively quickly. LightStream can get funds to customers the same day an individual who applies gets all of their loan information submitted by 2:30 p.m. EST on a business banking day. There are also a number of different payment options clients can choose from such as a 12-month same-as-cash loan or a five-year loan with 6.99 percent APR, depending on the company.

Advice for Others

While offering financing for your clients can be a win-win, make sure your clients clearly understand what they’re signing up for from the start. Also, take care not to assume who will or won’t be interested in the financing option. You don’t want to push individuals into that route, but bringing it up in the first meeting will let each customer know it’s available.

Salomon advises looking for finance companies that will accommodate the average sale of a project, depending on the size of the project.

“There is not a one size fits all approach to financing and clients’ financial needs,” Salomon says.

Fetig adds that many financing companies that work with landscaping projects have constraints on what must be included in the projects like a certain brand or amount of pavers.

“I would recommend that any landscaping companies thinking of offering financing take a long look at whatever companies they are looking to partner with to think about things such as what level of involvement will be required from your employees,” Fetig says.  

This is because you don’t want your salespeople to become de facto loan officers. Also, determine how quickly the funding of the loan happens and who will be paying you – the financing company or the customer directly.

Also, be aware of the fees associated with providing the loans. Just like how there are credit card merchant fees, the various financing options will have different costs for your company.

“Ultimately, remember by offering financing, even if it is simply a recommendation by your company of a lender to work with, remember that your customer’s experience with the lender is now a part of how the customer perceives your process; make sure the experience is in line with what you want for your customer,” Fetig says.

Jill Odom

Jill Odom is the content manager for NALP.