[Matt Kulp]

Looking for some feedback from anyone that has offered financing options for clients from a third party? I am not talking credit cards.

We have been approached by GE capital with programs that offer the usual no payment, no interest until January of 09 to all of our customers. They have the minimum amount of finance at $1000 and 4.5% contractor fee. Now I know that the contractor fee is a little higher then what most would pay a credit card company, but it is not unreasonable. I have always said that I would not get into this type of financing options, but it is looking pretty attractive. Reason being, most of our target market are higher income households and have the cash to pay for it up front. That being said, it makes sense to them to hold the money keep it invested and earn interest for a year until they have to pay before interest is accrued. GE always has deals like this going on throughout the year and I have finally had some time to give it more then a minute of thought.

Couple of questions:
Do you feel it would help marketing for projects to have a "hot button" offer like this?

Has anyone had positive or negative experiences with companies such as this?

In your opinion, what would customer perception be with this type of offer?

I have found the topic came up a couple of years ago on hear, but wanted to see if anyone has had a change of heart with the market getting a little softer then in 04.


I am just kicking it around right now. Before I throw it to the management team to pick apart, I was interested in what you guys and gals had to say.

[papercutter]

The place I was with in Phoenix offered GE Financing. Of the $1 million+ in jobs I sold, I had one homeowner fill out an app and decide to get financed elsewhere. Not a knock on GE, just my experience. Now granted, that was in 2005, and everyone and their brother was either rolling landscaping in with new home mortgages, or home equity loans. If lenders truly are tightening up, it may be a more attractive option today.

Customer perception is going to depend on how you pitch the program. I feel like- and again this is just my thinking- that the certain type of client I like to work with has approached us because they know that their ducks are in a row, financially speaking, and they tell me what they're spending. Having that sort of financing option would likely appeal to the "landscaping as commodity" buyers. In other words, I think it could be one more closing tool on the standard stuff, like foundation plantings, lighting, paver patios.... but it will neither deter nor sway the $100K landscape shopper.

Dave

[Mac]

Matt,

I also agree with Dave in that it likely wont appeal significantly to the upper end clients it sounds like you work with. IMO, I think it could tend to lower your image just a tad as it may apear you are attempting to broaden your base and lessen your image as a status piece (something im getting close to).

Consider frequent flyer miles. Initially, it was offered by ONE airline as a way of diferentiation. Now, litteraly every airline has them and they have become a nuisance and cost to the airlines. In short, it was not a sustainable competitive advantage. I would tend to believe this financing appeal would be very similar in the long run and have neutral effects in the short run.

[mrusk]

I had a few people ask for financing. Everyone that ever asked for it was denined. What does that tell ya?

Jobs ranged in price from 15k-80k. 4 customers, all rejected. All had bad credit. Late payers, no equity in house. Funny thing is, some drove esclades and lived in million dollar houses.

[LandArts]

Yup, customers asking about financing is a huge red flag.

[PSUscaper]

These are some good points.

If a customer can't get financing on their own, what would make them think you as a landscaper would?

If someone is willing to NOT go out and get some quotes on thier own for financing a project, what does that tell you about the client?

In this day of age with the internet and about a million online finacial institutes, what makes people even think about asking their landscaper for money????

It seems like a good selling point, but jeesh does that that client base seem a bit scary.

I could be wrong, but the days of landscapers offering financing seems to coincide with the days of banks giving mortgages to everyone too. Shouldn't this be some sort of lesson learned at this point?

[Matt Kulp]

All very good points everyone, and thanks for the feedback. These are some of the concerns I have had in the past and you all just reaffirmed why it would not be a wise decision. I guess I was looking at it as another choice other then credit cards... I have had some large jobs in the past be paid for by credit cards, and thought this would be another avenue. But I can see where offering this would be risky...

What I am seeing all around me are these types of deals from flooring companies, furniture, appliances, construction companies, etc... I was curious if I was missing something by not offering the option. I was looking at it from my personal standpoint in that I only buy comfort type of products when I have the money to pay for it straight up. But, I also will look for deals like this and get free money, keeping my money in the bank to accrue interest until I have to pay it off. I didn't look at it from the standpoint of potential leads needing it, because they have no other option.

[Inspired]

Most of my customers already have the financial end worked out. If they decide to borrow for whatever reason, they will have a much more attractive source then a retail lender anyway. And it's usually for more then just landscaping. For instance, a major remodel or add-on and landscaping is just a part of it.

[trees]

Interesting perspectives, but I think some of this depends on what your market is. I agree that for the 30k jobs on up, it may be a big red flag. In our case, however, we do mainly 5k-20k jobs and we ARE going to start offering financing. I have found that an ever increasing number of my perspective clients have been younger professionals and the ability to finance projects is important to this demographic. Many of them don't necessarily have the cash up front but won't have problems making the payments.

I agree that rampant and reckless financing has been a problem in our economy, but the availability of credit in general is absolutely essential to it. It's not our job to police how creditors hand out cash, and from everything that I'm reading that industry has had a wake-up call and is tightening its standards.

Where I disagree with the previous posts is that by offering financing you're somehow entering into the commodity market. It all depends on how financing options are presented. Sure, they can look at banks, etc. to find financing if you don't offer it, but I look at it as making our operation more of a one-stop shop. People pay extra to have you subcontract irrigation, lighting, site work, etc. for the convenience of having one person as a contact. Having financing available can make the process less of a hassle for some.

Now, don't get me wrong, I'm not suggesting that everyone run out and sign up with GE or another financing group, but I don't think that it's necessarily a bad thing, either.

[Terre]

Here's a side issue. I'd be a bit wary of how GE Capital treated you. They bought out a store credit card I held a few years ago. My payments, which until then had been perfect, suddenly started accruing late fees. I'd send the check, it'd get cashed two weeks later, and I had a late payment fee.

I started sending the checks return receipt requested, so I could prove when they were received. Same thing happened. I called to ream someone, which is a particular talent of mine. I was informed by a customer service manager that tough luck, THEY were not responsible for how long my check sat in their mail room.

FYI, I take credit cards, through paypal. Most of my jobs are small, but I think it helps, partly because people always think if they aren't satisfied they can refute the charge. Hasn't been an issue yet. But I'm up front with them. If they want to pay by credit card, fine, but I charge the extra percentage to the customer that paypal charges me.

[fakie99]

"Yup, customers asking about financing is a huge red flag."

so i suppose you pay cash for all your big ticket items?

our economy runs on the availablity of credit - some people use it to buy cars, houses and yes, landscaping.

in my experience, offering financing has increased our average job size, and made the difference in whether projects proceed or not. (we did one this year that went from 8K to 45K becuase the homeowner was able to finance the project.)

customers asking about financing is not a red flag - we should get that sort of cynical thinking out of our heads. how they manage thier finances is their decision alone. as long as we have reputable, dependalbe finance companies providing credit, a contractor's risk is actually lowered by having a large project financed by a third party.

we use john deere landscapes and thier fee is 3% off the top , btw.