Smart Finance Guide

Smart Finance Guide

Lawn & Landscape brings you insight into offering consumer financing options to help control the costs of landscape projects.

April 2, 2015

Champagne taste on a beer budget

Offering financing options can help customers afford the landscaping designs they want.

story by Katie Tuttle | illustration by Justin Armburger

When it comes to designing projects for customers, your team may find itself in a rut when it comes to what it thinks up and what the customer can actually afford.

Third party and consumer financing is a good way to get out of this rut, especially when it comes to getting customers to bump up the size of their projects.

When it comes to financing, imagine it as yourself buying a new appliance and paying with a credit card. You don’t physically hand money to the store from which you purchased the product. Instead, you pay from your bank account to your credit card company and the credit card company gives money to the store.

If your client decides to finance a project, either part or all, they first need to get approved by the bank you’ve partnered with. Once they get approved, the bank acts as a middle man of sorts. Your company gets paid from the bank and the customer pays off the total cost, plus any interest to the bank.

And with that kind of flexibility, your clients can expand their project budgets or get what they want sooner.

“I know there are some cases where someone was planning to spend something but since they could finance it, they were able to do more,” says Dave Reed, vice president of landscaping at Meadows Farms in Chantilly, Va. “We used to hear with some of our fringe customers that they had to wait to get their taxes back, but when you offer this, that kind of timing is not an issue.”

A great advantage.

Bill Banford, owner of The Sharper Cut out of Marlboro, Md., has a number of customers who can afford a small budget, but because of the size of the project, they finance the difference.

“One lady last year had a $25,000 budget,” he says. “Then once we started designing, she did an almost $100,000 project.”

He adds that financed projects are carried out in the same way as unfinanced options.

“The contract is carried out like any other contract; the only thing different is payment terms,” he says. “Whatever the client commits to is installed all at once. This could be a project that is 100 percent financed or partially financed.”

Banford says it’s not always about the customer upgrading. In some cases, like the $100,000 project he referenced, it’s a matter of a customer’s desired project being completed all at once and not in phases as they have money come available.

“We may have designed a project that has a two-level patio, seat wall, fire place and outdoor kitchen,” he says. “Instead of breaking that into a series of phases, the financing may allow the client to do more, or all, at once.”

Meadows Farms offered financing previously, but at the time the interest rate was 18 percent so it wasn’t very successful. Because of that, Reed says the company discarded the option and only picked it back up a couple of years ago.

“The banks have choices from either ones with lower percentages with extended terms or zero percent financing with regular payments,” he says. “For simplicity's sake, we chose just to go with zero percent for six months. Then we added to it with zero percent for 12 months.”


Eligibility investigation

If your company is considering adding a financing option, the first thing you should do is contact a bank and see if it’s an option for your company.

“I had an experience where I purchased a new air conditioning system for my house and they had a similar setup on their site and I thought it was very clever,” says Michael Cournoyer, owner of Total Landscape Concepts in Davie, Fla. “It made my decision to use that company because I had 11 months to pay it off with no interest.”

Seeing how easy that option was, Cournoyer reached out to a financial institution about offering financing. He says once the company got back to them, it was relatively easy to get set up.

The bank did a credit background check on the landscape company to make sure it had been in business for a good amount of time and had no bankruptcy in its past.

The bank also offered training where a rep came to Total Landscape Concepts and went over the whole process of offering financing to customers.

“It wasn’t too complicated and then we were up and running,” Cournoyer says. “The first year was a little rough going, just trying to get the salesmen into using it as a sales tool, because they weren’t used to doing it.”

Cournoyer says after he got used to it, he realized it made for a much easier sale and now they use it almost all the time.

“We quadrupled the number of [financed] sales the second year of using it,” he says.


The Sharper Cut offers customers a few financing options, including one of 12 months with zero interest. It costs the company a percentage of the project, a discount fee between 4 to 7 percent.

“Some people like that interest free because they can get it without getting charged any interest,” Banford says. “But the interest rate for the interest free programs is high (after the interest free period expires) and you’ll want to pay it off in 12 months. If you don’t, it’ll be cheaper to put it on a lower interest term.”

Michael Cournoyer, owner of Total Landscape Concepts in Davie, Fla., says when considering finance options, it’s important to think of your company as well as the customer.

“Each program costs us money,” he says. “So the more time we give the customer, the more it costs us in the money we pay (the bank). The more favorable it is to the customer, the more it costs us.”

“For instance, if we do zero down, zero interest over 12 months, that program costs us 4.5 percent of the transaction,” he says. “But when you’re looking at getting the job versus not getting the job, 4 percent is a good commission to do something like that.”

He says that shouldn’t sway your decision on what you offer, but it should be something to think about.

Reed says the financing options are successful because not a lot of the competition is currently offering it.

“It catches people’s eyes,” he says.

On the other end of the spectrum, Tammy Price, office manager at SYNLawn Central California, says her company offers it specifically because the competition in the area does.

“We have to do it to be competitive with what’s going on in the market,” she says. “That’s why we offer it. I would just think it puts the edge of the competitiveness to your competition. It gives you one more tool to offer.”

Meadows Farms offers a link on its website for financing options.


Third-party financing

We surveyed more than 150 contractors about how they use third-party financing, and the results showed not many do. Only a few offered it previously and stopped, citing reasons such as: it cost too much, it took too long for me or my staff to understand and sell the benefits to our clients, it took too much time to process/manage the finance program and my clients preferred other means of payment. Results also showed that more customers want to pay with cash rather than write a check or put the bill on a credit card.



“People can apply for financing and I think it just takes a few minutes to get an approval and an approval amount,” Reed says. “There there’s one form that needs to be signed – a physical contract – and that’s it.”

Despite having the website option, Reed says most of the projects they finance happen when the landscape designer is at the customer’s home presenting the design estimate.

Cournoyer says it has had a positive impact on business.

“We’re getting in the somewhere 60 percent rate of people using it,” he says. “It’s turned into a very significant option.”

Banford says offering financing has helped improve business at The Sharper Cut. “We definitely produce more and sell more because of financing,” he says.

“We wouldn’t have as much sales. We would have kept busy (if we didn’t offer financing) but we would have had to work harder to get more sales. It’s definitely been a positive impact.”



Clear explanation.

Making sure the customer understands expectations is vital to a smooth financing process.

Cournoyer says financing may have a negative impact if you don’t make sure customers know what they’re signing up for.

“What you don’t want to have is a customer going back to [the bank] and saying, ‘This isn’t how it was explained to me,’” he says. “They’re going to err on the side of the client.”

He says they had one customer tell the bank it was explained differently, even though the customer had acknowledged online and signed a document.

“It caused us grief and a lot of back pedaling,” he says. “We didn’t want to have a bitter experience with the customer. So in the long run, it actually cost us another 4 percent to offer the customer what they thought they were getting.”

As a result, Cournoyer says his company is now very clear and upfront in making sure the customer understands exactly what they’re signing up for.

“We do everything except tattoo it on their forehead,” he says.

If you do that, there’s no reason you’ll lose customers, and Cournoyer says you’ll actually gain business from customers returning for more work.

“We’ve had a lot of multiple repeat business that I’m not sure we would have gotten without it,” he says. “And they’ve already had the experience; they’ve already had the credit. If they decide to do it, they’ve already gotten the approval.”


Identifying worthy clients

While financing can be a viable avenue to increase the price of a project, you may not want to offer it to all potential clients.

“Part of our sales pitch is that we don’t like to push on people,” says Bill Banford, owner of the Sharper Cut. . “(Otherwise) they think we think they can’t afford it. When we’re going over job budgets and pricing, if we get a sense they can’t (afford) it, we tell them we have the ability to help them spread out costs.”

On the other hand, you may want to cast a wide net and see what you catch.

“We bring it up on a first meeting,” says Michael Cournoyer, owner of Total Landscape Concepts. “It’s hard to pick the person it’s going to fit for because the people you think won’t do it because of their expensive house, they’re the most interested because they understand the value of the dollar.”

Tammy Price of SYNLawn Central California says her company doesn’t exactly get a say in when to offer it and when not to.

“They’re pretty well attuned to it, so most of the time they’re asking us, ‘Do you have this available?’” she says. “The clients are much more savvy on it than we are these days. They’re expecting it, so we find we have to offer it because our competitors are offering it.”

Cournoyer says the most important part of offering it to customers is making sure they understand exactly what they’re signing up for, especially since there are other financing situations out there that are scams or aren’t upfront with interest costs.

“I’m very upfront with them on how high it will be if they don’t pay for it,” he says. “You have to be very clear and make sure they understand what they’re signing up for.”

Cournoyer says a lot of customers have mentioned bad experiences they’ve had with financing for a local furniture company and because of that, they’re wary of doing it again.

“If they’ve had a bad experience and don’t want to do it, I don’t push them,” he says. “But I let them know that the pricing isn’t going to change. They don’t get a better deal if they pay cash. Whether you finance it, pay for it on a credit card or write it on a check, it’s all the same amount.”


Collecting cash.

If you decide to try offering financing options to your customers, something important to look at is how you will get paid for the financed projects.

“With some vendors, it’s an easy online or fax submittal process and you are direct deposited within 24 hours,” Banford says. Other vendors may require a form mailed to the client for them to sign off on first. If this is the case, it’s important to send the form while the job is still in progress, so the client has it to sign as soon as it’s completed.

“We made the mistake of not getting this particular form sent in a timely matter, and that took an extra seven to 10 days to get paid due to our own fault,” Banford says.

You’ll also want to know when you’ll get paid.

Banford says this was a problem early on for his company, because a lot of the vendors pay you when the project is completed.

“If you have two crews running and money’s a little tighter, and you have two jobs being financed, that $40,000 job could take two weeks so you could go an extended period of time without money coming in the door,” he says. “We had times where money was a little tight so what we ended up doing on the news sales is we asked for a bigger deposit.”

Meadows Farm doesn’t get down payments, but Reed says the company has had surprisingly few problems with it.

“We could have required that,” he says. “We could have set it up that a down payment was necessary. But you’re doing it to market and gain customers, so the simpler you make things, the better. If you complicate things you’re shooting yourself in the foot.”

For Meadows Farms, financing makes up around 10 percent of the company’s total business, so not offering a down payment doesn’t affect them too much.

“It’s not the most important thing that we do, but it’s a piece that makes us better than what we were,” Reed says.

Banford suggests planning your jobs so that your company isn’t doing multiple financed jobs at the same time, and Reed adds, that payment on a financed job may not come as soon as it would on an unfinanced project. “We get money three weeks later than we normally would have,” Reed says. “That would be a big consideration to smaller companies that depend on a constant flow of money.”