SELLING SALES Harris says that there are two types of same-as-cash programs: indirect and direct. In an indirect program, the contractor finances the job and the financial institution buys the loan from the contractor when the work is complete. He says that such programs require the contractor to provide customers with a credit application, to inform them of their three-day right of rescission, and to disclose all the terms and conditions. This creates more paperwork for the contractor and can add liability.
By contrast, with a direct lending program the contractor tells the customer about the availability of same-as-cash financing and provides the lender’s toll-free phone number. The lender takes the application and manages the paperwork. When the job is done, the check is made out jointly to the contractor and the customer, so the customer can’t use the money for anything else.
Pitching this financing option to someone is a bit different from pitching other types of loans. “With traditional financing, you sell the customer on a monthly payment,” Audette says. “But the same-as-cash customer is basically a cash customer. They could pay out of pocket today if necessary, so you need to appeal to the time-value of money. The key to making it work is to get your sales reps to understand how the benefits of same-as-cash will bring more sales.”
One hurdle to convincing salespeople is the fee charged by the lender. For instance, EnerBank charges the contractor 3% to 7% of the loan amount, which can lead sales-people to devalue the job in their minds. “Sales guys don’t look at the big picture,” says Scott Trendle of One Stop Home Improvement, a Sterling Heights, Mich., replacement contractor. “If there’s a 7% charge, that amount comes off of the job price, and since their pay is based on the dollar amount that’s sold, their commission also decreases somewhat. It doesn’t affect them greatly, but it affects them enough [to create some resistance].”
Contractors counter this resistance in different ways. Audette, like most contractors, builds the fee into every job quote and offers a discount to customers who pay cash. Regardless of whether the customer finances, the final price is close to what the company really wants for it.
Ultimately, the best way to win salespeople over is to demonstrate that the increased volume that same-as-cash generates will more than compensate for the fees. When Trendle first started offering it a couple of years ago, he took a cue from the same-as-cash strategy itself by offering to let his salesforce try it for free. “For the first month that they offered it to customers, I agreed to eat the fee for all 30-day promotions and to split it with the sales guys for all one-year deals.” The offer eliminated his salespeople’s reluctance to offer same-as-cash to customers, and they quickly embraced it. “You need to create buy-in with salespeople. Once they use it, they understand that it’s a great tool.”