Offering Customer Financing as an HVAC Contractor

A failed system is a large bill that almost nobody planned for. Offering payments on every replacement quote is one of the most common pieces of advice owners give each other, because a monthly amount is easier to say yes to than a large total. Here is how it works from the contractor's side.

How the money moves

1. You sign up with a lender or a financing platform. Many equipment manufacturers and distributors have programs, and so do independent lenders.
2. The customer applies, usually on a phone or tablet at the kitchen table.
3. If approved, the customer picks a plan.
4. You do the job. The lender pays you, minus any dealer fee.
5. The customer repays the lender. Collections are the lender's job.

You don't carry the debt. Carrying it yourself, with in-house payment plans, is a different business with its own legal requirements and real risk of not being paid.

What it costs you

The cost is the dealer fee: a percentage of the financed amount the lender keeps. Plans that are attractive to the customer, such as a no-interest promotional period or a low fixed rate, carry higher dealer fees. Standard-rate plans often carry little or none.

Ask every lender for its full plan list with the dealer fee for each plan. Then decide which plans you will offer.

Example numbers, to show the arithmetic only: on a $10,000 job with a 7% dealer fee, you receive $9,300. If your pricing didn't allow for that, the $700 comes out of your profit.

Build the fee into pricing

Options shops use:

• Price every replacement so the common plan's fee is already covered.
• Offer a small number of plans and know the fee on each.
• Offer a cash or check price that is lower. Check your lender agreement and your state's rules first, since some restrict how this can be done.

Don't add a surcharge for financing without checking. Lender agreements and state law often limit it.

Presenting it

• Offer it on every replacement quote. Don't guess who needs it.
• Show the monthly payment next to the total for each option. A better system that costs a little more per month is an easier decision than one that costs thousands more.
• Let the customer apply privately on their own phone.
• Have a second lender for customers the first one declines, if you can.
• Use only the payment figures and wording your lender provides. Advertising credit terms is regulated.

Before you sign up

Ask each lender:

• What are the dealer fees, plan by plan?
• How fast am I paid, and is it before or after the job is complete?
• Is there a monthly fee, a minimum volume or a setup cost?
• What happens if the customer disputes the job? Can the lender take the money back from me?
• What approval rates do contractors like me see?
• What can and can't I say in advertising?

Then check whether your state requires any license or registration for arranging consumer credit, and ask your accountant how to book dealer fees.

Common mistakes

• Offering only the no-interest plan without pricing in its fee.
• Mentioning financing only when the customer balks at the price.
• Quoting payment amounts from memory. Use the lender's calculator.
• Running your own payment plans to avoid the fee, then spending evenings chasing payments.
• Not reading the chargeback terms.

FAQ

Sources

• Consumer Financial Protection Bureau: Truth in Lending (Regulation Z)
• Federal Trade Commission: Truth in Lending Act

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HVAC Cheat Sheet is published by 90 Leads, a marketing company that works with home service businesses, including HVAC contractors.