How to Compare Home Improvement Financing Programs for Contractors
Compare home improvement financing for contractors: how dealer fees, funding timing, approvals and loan limits affect your margin and close rate.
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On this page 8 sections
- How Home Improvement Financing for Contractors Makes Money From You
- Dealer Fees on Same-As-Cash vs. Low-APR Plans
- Comparing Lenders Side by Side: A Contractor Financing Program Comparison
- Funding Timing: Completion Certificates and Partial Draws
- Pricing Jobs to Absorb Dealer Fees Legally
- Presenting Financing at the Kitchen Table
- Where Card Payments Fit Alongside Financing
- Next Steps
Key takeaways
- Dealer fees usually rise as the homeowner's deal gets better, so same-as-cash promotions tend to cost you the most.
- Compare lenders using your own approval, funding and fee data, not a rep's rate sheet or an online chart.
- Read your dealer agreement before you change pricing, because many limit what you can charge financed customers.
- Financing covers the big tickets. Card payments still handle deposits, service calls and homeowners who don't finance.
When a homeowner sees a large roof or HVAC quote, the next question is usually "Can I make payments?" Home improvement financing for contractors answers that question, but you pay for it. This guide explains how financing programs make money from contractors and why promotional plans cost you more. It also gives you a worksheet for comparing lenders on dealer fees, approvals, loan limits and funding speed. Then it covers how to absorb dealer fees without breaking your agreement and how to present financing at the kitchen table.
This guide doesn't rank specific lenders. Dealer fees, credit tiers, loan limits and funding rules are set by contract, vary by trade and volume, and change over time. Use the framework below on every lender you're considering, whether it's a large national consumer finance company or a local credit union. Confirm every current number with the provider in writing before you sign.
How Home Improvement Financing for Contractors Makes Money From You
On a promotional plan, financing looks free to the homeowner. Someone still pays for it, and that someone is often you.
Most programs earn revenue in a few ways:
- Dealer fee (merchant discount). The lender keeps a percentage of the amount it funds to you. On a financed job, you receive the approved amount minus the fee.
- Interest paid by the homeowner. On standard-rate plans, interest carries more of the lender's return, so your dealer fee is often lower.
- Program or enrollment fees. Some lenders charge setup, membership or minimum-volume fees. Ask for the full fee schedule in writing.
- Promotion-specific pricing. Each plan you turn on can carry its own dealer fee.
The lender takes on the homeowner's credit risk, but you still carry some risk. If a homeowner disputes the work or won't confirm completion, your funding can stall. Depending on the agreement, it can also be reversed.
Ask every provider: "What happens to my funding if the homeowner disputes the job after I've been paid?" The answer tells you a lot about the program.
Dealer Fees on Same-As-Cash vs. Low-APR Plans
The core tradeoff is simple: the better the deal looks to the homeowner, the more it usually costs you. When a lender waives or reduces interest, it typically makes up the difference with a higher dealer fee.
| Plan Type | What the Homeowner Sees | Your Dealer Fee, Generally | Watch-Outs |
|---|---|---|---|
| Same-as-cash / deferred interest | No interest if paid in full within the promo period | Often among the highest | With many deferred-interest plans, interest can apply back to the purchase date if the balance isn't paid off in time. Explain this clearly. |
| Reduced fixed APR | Low rate, set term, predictable payment | Moderate to high, depending on rate and term | Very low rates over long terms usually mean higher fees |
| Standard APR, longer term | Lowest monthly payment, more total interest | Often the lowest | Higher total cost can make some homeowners hesitate |
| Deferred payment ("no payments for X months") | Time before the first bill | Varies widely | Make sure the homeowner knows when payments and interest start |
Illustrative Math on One Job
These figures are hypothetical and don't reflect any lender's actual pricing. Take an $18,000 HVAC replacement:
- On a plan with a hypothetical 6% dealer fee, you'd receive $16,920.
- On a promotional plan with a hypothetical 12% dealer fee, you'd receive $15,840.
That $1,080 difference comes straight out of your margin. You don't need to avoid promotional plans. You do need to know which plans you've turned on, what each one costs, and which ones your salespeople present first.
Comparing Lenders Side by Side: A Contractor Financing Program Comparison
Pricing for dealer programs generally depends on your trade, your volume, the plans you choose and what you negotiate. A published "starting at" figure won't tell you what you'll actually pay. Compare lenders on the factors below, using written answers and your own job data.
| Factor | Why It Matters | What to Ask or Measure |
|---|---|---|
| Dealer fee by plan | Sets your real margin on each financed job | A written fee schedule for every plan you'd offer |
| Approval rate | Homeowners who aren't approved don't close | Your own applications vs. approvals over 60 to 90 days |
| Credit tiers and second look | Decides whether near-prime homeowners get an offer | Does a decline route to another lender or a different plan? |
| Project minimums and maximums | A roof, a kitchen and a furnace swap need different limits | Per-loan limits, and whether they differ by trade |
| Funding trigger | Controls your cash flow | What exactly releases funds, and how long it usually takes |
| Partial or stage funding | Matters on multi-week jobs | Are draws available, and under what conditions? |
| Application method | Affects how smoothly the sale goes | Homeowner's own device, text link, online or paper |
| Dispute and recourse terms | Your exposure after funding | When can funds be pulled back? |
| Volume or exclusivity terms | Can limit your flexibility | Minimums, exclusivity clauses, termination terms |
| Marketing rules | Poorly worded financing ads create legal risk | Approved ad language and required disclosures |
Revolving Accounts vs. Installment Loans
Ask any lender whether the homeowner gets a revolving account they can use again or a closed-end installment loan for one project. A revolving line can help when the same homeowner adds work later, such as a maintenance plan after an HVAC install. It also changes how you explain the terms. An installment loan is simpler to present: one amount, one term, one payment.
Second-Look and Multi-Lender Setups
Some contractors run two programs: a primary lender plus a second option for homeowners the first one declines. This can recover jobs you'd otherwise lose. Before you add a second lender, check whether your existing agreement includes exclusivity terms that prohibit it.
Banks, Credit Unions and Manufacturer Programs
National consumer finance companies aren't your only choice. Regional banks, credit unions, fintech lenders and equipment manufacturers may also offer home improvement programs. If a brand you install sponsors a financing program, compare its fees, limits and funding rules against a direct dealer agreement using the same worksheet.
Funding Timing: Completion Certificates and Partial Draws
Approval doesn't put money in your account. On most programs, funding follows a sequence like this:
- The homeowner applies and is approved for an amount and a plan.
- You sign the contract and schedule the work.
- You complete the job, or a defined stage of it.
- The homeowner confirms completion. Depending on the lender, that could be a completion certificate, an e-signature or a text confirmation.
- The lender sends the approved amount, minus the dealer fee, to your business bank account.
Delays usually happen at step 4. The homeowner is traveling, the final invoice doesn't match the approved amount, or a punch-list item becomes a reason not to sign.
Getting Funded Faster
- Match the financed amount to the contract exactly. Run change orders through the lender's process before you finish.
- Ask for the completion sign-off before the crew leaves, while the homeowner is standing in the finished space.
- Keep photos, permits and inspection results in the job file.
- If approvals expire, know the window so long-lead jobs don't time out.
Partial Draws on Larger Jobs
On a whole-house remodel or a large roof, waiting until the end can strain cash flow because you pay for materials and labor up front. Some programs allow stage funding, and others fund only at completion. Line up the lender's rules with your own construction draw schedule for milestone payments. Track which payments released which lien rights, and review when to sign conditional vs. unconditional lien waivers.
Deposits are a separate question, and deposit rules vary by state, so check yours. California contractors can start with our guide to taking contractor deposits in California, then confirm current requirements with a qualified professional.
Pricing Jobs to Absorb Dealer Fees Legally
This is where contractors can get into real trouble. The tempting move is to add the dealer fee to the price for homeowners who finance. Don't do that without checking your agreement and the law first.
- Read your dealer agreement. Many prohibit charging financed customers more than cash customers or adding a separate "financing fee." A violation can cost you the program.
- Build financing into overhead. Treat dealer fees as a cost of doing business, like fuel or insurance, and price every job to cover them.
- Use a blended rate. Illustrative only: if a hypothetical 40% of your revenue is financed at a hypothetical average dealer fee of 8%, financing costs about 3.2% of total revenue. Fold that into your markup.
- Be careful with paid-in-full discounts. Before you advertise a discount for paying without financing, confirm that your dealer agreement and state law allow it.
- Use lender-approved marketing. Advertising payment amounts or rates may require specific disclosures. Use the language and calculators your lender provides, and confirm with counsel.
Card payments follow separate rules. Programs such as cash discount pricing for card payments and dual pricing for card and cash customers apply to card transactions and must follow card network rules and state law. They don't apply to financed loans.
This is general information, not legal or tax advice. Confirm your pricing approach with an attorney or accountant who knows your state.
Presenting Financing at the Kitchen Table
Financing closes more jobs when you present it as a normal payment option rather than a judgment about the homeowner's credit.
- Bring it up early. Mention payment options with the estimate so the homeowner doesn't get stuck at "yes, but how?"
- Lead with options, not promises. Never promise approval, a rate or a payment amount before the lender makes an offer.
- Explain deferred interest plainly. If a plan is deferred-interest, say what happens if the balance isn't paid off by the deadline.
- Let the homeowner apply. They should enter their own information through the lender's process. Don't fill it in for them.
- Check cancellation rights. Before you start work on a contract signed in the home, find out whether cancellation rights apply, and confirm with a professional.
- Have a fallback. If a homeowner is declined, offer a second-look lender if you have one, a smaller scope, or payment by card or check.
An illustrative way to phrase it: "You can pay by check, by card, or with a monthly plan through our financing partner. If you'd like to see a monthly option, you can apply through our financing partner and see whether you qualify. There's no obligation to take it."
Where Card Payments Fit Alongside Financing
Financing handles the big tickets, but plenty of your revenue still comes in as card payments:
- Deposits, where your state allows them
- Service calls and repairs
- Final balances above the approved amount
- Homeowners who simply prefer to pay by card
Crews collecting at the job site can use mobile card terminals for payments in the field. The office can take payments over the phone with a virtual terminal for remote card payments. Our explainer on taking card payments without hardware covers how virtual terminals work. Keyed payments typically cost more to process, and why online and keyed transactions cost more explains the reasons.
MannyPay provides merchant accounts, card terminals, virtual terminals and cost programs such as cash discount, dual pricing and surcharging where permitted. Eligibility and pricing depend on underwriting and your business.
Next Steps
- List the financing plans you have turned on today and the dealer fee for each one.
- Track applications, approvals and days to funding for the next 60 to 90 days.
- Request written fee schedules from every lender you're considering, and score them with the comparison worksheet above.
- Review your dealer agreement's pricing rules with a professional before you change how you quote.
- Align funding timing with your draw schedule and lien waiver process.
If you also want to tighten how you accept card payments on job sites and over the phone, request a free payment processing quote. A MannyPay specialist will respond within one business day.
This article is for general educational purposes and is not legal, tax or financial advice. Card network rules and state laws change; confirm current requirements for your business.
