Bottoms Up! – A Financing Perspective For Merchants and Home Improvement Contractors In A Challenging Economy

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For years, Point-of-Sale (POS) merchants have found success using convenient financing options that let consumers make purchases and pay later or over time. Many studies have shown that customers are more likely to buy or buy more or bigger items when using financing. It’s a great tool for merchants and particularly Home Improvement Contractors.

As I am sure many of you have felt, the recent economic challenges have resulted in credit tightening and fewer customer approvals. This has opened the door to alternative financing options becoming more relevant and meaningful for partners. Over the last 10 + years, the Prime financing solution has typically driven or influenced financing decisions for point-of-sale merchants. Homeowners were more easily approved and received lower rates. However, as often is said “Timing is Everything” and today’s environment is different. Savvy contractors are beginning to look further down the “finance or credit spectrum” for approvals.

I want to give you a Bottom Up perspective of financing solutions which can lead to getting more sales and better overall, or Top Down, results. The company I lead, @Microf, is a near and subprime alternative finance solution provider to the HVAC and Plumbing industries (we will expand into the broader home improvement sector later this year). This is who we have been for the last 10 years, and we feel we do this rather well. Interestingly, over the last 5 years, the credit environment has been so stable right through the recent pandemic, that we haven’t been in as high demand. But…. this changed in the recent 3-4 months and will continue for the next 1-2 years.

In this time of early 2023, prime lenders have been dealing with market challenges which have resulted in tightening credit and charging contractors more fees. Even before this current recession-like environment, a few very good non-bank lenders were acquired by banks and therefore, naturally, became more conservative in risk and credit operations. This economic downturn has only magnified this conservatism and credit tightening which negatively impacts sales. So how does this impact you, the merchant/contractor? Simply, your prime partners say no to your customers more often or charge you more, so that they can say yes. In what’s called a “financing waterfall”, the customer application flows down to a traditional near-prime, or 2nd look partner. But, in these times, many of these finance partners have also been impacted by capital markets and credit challenges, so still no approval. Therefore, an increased number of applicants will flow to solution providers like Microf who are at the bottom of the waterfall. What that means to you, is in these challenging economic times, it is our turn to step up for you.

So how can we help you, the merchant/contractor, right now? First, simply by being there for you when you need us. Think “Bottom’s Up”! If you have a customer with challenged credit, we’re here for you. If you are part of a waterfall solution—the “buck stops here” because we sit at the bottom. So again, Bottoms Up! We have become more meaningful to both the prime and near-prime finance solution providers and have partnered up with top-tier finance companies and banks. Obviously, the banks and finance companies also want to serve the needs of the contractor partners. It’s in their best interests. Therefore, they are interested in working with us now more than ever before. That’s why I named this article Bottom’s Up! We now influence a financing partner decision more significantly, even up to 30% more sales in this environment. We have structured a solution that starts with partners at the top but ends with us at the bottom, which is more relevant than ever.

Prime and near prime lenders, get to know us as well as we will help you take care of your customers. Right now, it’s important that you all know that Microf, and other near and sub-prime solution providers, are here and can be there for you when you are in need. Get to know us better…. So, Bottoms Up! … and much success to you and your business in 2023. (Keep tuned as I will update periodically as the economic environment is ever-changing).



By Zenon Olbrys 


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