“Cash is king” is a saying most business owners agree with. When it comes to contracting repair and renovations, sometimes the job costs more than the homeowner has budgeted, or what was supposed to be a simple remodel morphs into a bigger, more expensive project.

Even though getting the full payment in one or two installments is the norm and usually the preferred method, offering financing options for your credit-worthy customer could help you gain more business. A homeowner might not have $10k to plop down over a two-month period, but they could have it in four or six months. Providing financing has its good and bad points, but they’re all worth considering.

Offering Financing Can Lead to Bigger Projects

If your customer needs a kitchen and bathroom remodel but can only afford to pay cash for one of them, offering financing could mean they can get both done. That means they’re only tearing up their home once instead of twice. And even though the end results of a remodel are wonderful, the journey to get there is often stressful. Going through it once and completing both jobs at the same time could well be worth it to a homeowner.

Monthly Payment from Customers Looks Like Positive Cash Flow

Let’s say you’ve got five projects. Two paid you a deposit and the balance when the jobs were done. The other three financed their projects over six months. This means that for the next six months, you will have steady income to post on top of other jobs you do that continue to pay traditionally. A regular cash flow is attractive to lenders, they like to see healthy account receivables. So, if you ever need financing yourself, being able to point to your receivables and show you have money coming every month will make you look like less of a risk.

Accepting Financing Means Jobs Could Cost More

Many of the apps that allow contractors to offer financing to their customers collect a percentage of the project for a fee. If you want to recoup that money, you’ll have to add the fee into your initial bid. Or you can provide a bid, tell your customers financing could be an option and if they choose it, submit the amount plus the finance fee for approval. Either way, you’ll want to let your customers know if you’ve upped the bid because of the fee.

There’s a Chance You’ll Get Stiffed

Offering financing to customers can lead to more work for more money, but it can also increase the chances of not getting paid for jobs. A homeowner might pay the first couple of months, but then for any number of reasons, stop paying. There are steps you can take to get the money owed you, but most require the assistance of legal representation, which might cost more than what the homeowner owes you. However, sometimes adding verbiage into the contract that states legal action up to and including collection activities and litigation is enough to keep homeowners from stiffing you.

Offering financing to your customers can lead to more business and admittedly, in some cases, more hassles. But when you own your own business, that’s the norm. As far as we’re concerned, getting more customers and a fatter bottom line is most often worth the risk of a client or two not keeping their end of the bargain.