Contractor financing offers benefits to both you and your customer. It can help you close more sales and increase your revenue and job size.
Customers often need help to afford your services or products. They may go elsewhere to acquire funding, which can take a long time and result in more stress for both you and the customer.
Contractor financing allows contractors to close more deals without sacrificing their own money. Unlike standard company loans, contract financing uses the value of an awarded contract to underwrite a loan and reduce risk. Typically, contract finance is restricted to contract-related costs and is paid back once duties are completed.
Contractors usually access financing or payment options by partnering with lending network companies like Acorn Finance. These companies enable customers to check financing offers quickly without impacting their credit scores. This helps them find a solution that fits their budget and ensures the project is completed. This allows the contractor to focus on their work and the customer to get their dream home. The result is a win-win for both parties. This is an excellent way for small contractors to grow their business and compete with larger competitors.
Increased Job Sizes
Contractors seek larger contracts to grow their businesses, but erratic payment cycles can strain cash flow. Obtaining financing from a lender can help bridge these gaps so you can get the needed materials and buy or rent equipment when required.
A contractor line of credit functions like a traditional business credit card, providing you with a flexible borrowing limit to access funds as needed. However, these lines of credit are generally limited to a specific contract value and structured to align with the payment terms of the contracted work.
Contractor financing offers a win/win solution for local contractors and public agencies with large projects to complete. It helps agencies vet smaller contractors using the same risk analysis tools for loans and provides mobilization capital for qualified small businesses.
Better Closing Ratios
Contract-based businesses face high upfront costs and long pay cycles that put their ability to complete work at risk. This is especially true for smaller contracting firms, subcontractors, and women- and minority-owned businesses.
Contractor financing, or mobilization funding, is a specialized form of financing that uses the value of a contract awarded to your business to underwrite a loan. It’s similar to invoice or accounts receivable financing and is typically offered by private firms specializing in this type of finance.
As a result, it weighs less on personal credit and business profit but does require proof of the contract you won. And because they’re tied to a specific contract, the repayment terms are structured around your contract’s payment schedule.
Increased Customer Satisfaction
Customer satisfaction increases when customers can pay for your services in a way that suits them. For many customers, financing makes it possible to purchase your services without the upfront cost that can cause cash flow issues. This means you can help more of your customers, and you may even reduce the number of shoppers you receive from competitors that don’t offer financing options.
Contractor financing companies connect contractors with lenders that can loan money to customers. Unlike traditional loans that use a variety of factors like personal credit and business profit, contract financing companies rely on the value of a won contract to underwrite a loan. This is sometimes referred to as contract mobilization lending or small-business term loans.
Contractor financing is a great way to reduce the stress of working with customers concerned about their project’s financial portion. It can also help improve customer satisfaction levels and increase referrals.
Contractors are often required to pay significant up-front expenses before they receive a dime from their clients. This can leave them with insufficient working capital for their payroll and other expenses until they are paid.
Contractor financing allows them to cover their upfront expenses and provide customers with a payment plan that fits their budgets. This can make a big difference in a customer’s experience with your company and improve the chances of repeat business. This is especially important when competing with larger contracting companies that can offer competitive rates and financing terms.