Should a Cabinetmaker Finance Customer Purchases?

Cabinetmakers discuss extending credit to customers. November 5, 2007

Does anybody provide any type of financing or payment system for their customers? We accept Visa/Mastercard, but had a customer ask if we had any type of financing system.

This is the first time I have been asked to do this and wonder if it is wise. Carrying the money over the term would not be a problem, but is there a standard interest rate/late fees? I certainly don't intend to make a habit of this, but I don't want to push away a customer if I can avoid it.

Forum Responses
(Business and Management Forum)
From contributor P:
I'll presume that you are a custom cabinetmaker like most of us. If your client is asking you to finance their nonessential purchases, run the other way. What kind of fix are they in that they need you to do this? Are we talking about a builder who needs cabinets in the house in order to sell it, but won't be able to pay you until he does? In any case, this request would be a huge red flag for me. I think it's unlikely that you would make enough money on interest to make the risk worth it, and god forbid you ever need to foreclose on an unpaid loan to a client.

From contributor G:
Check with Wells Fargo financial. They can loan your customer the money on a 1 year same as cash option.

From contributor J:
May try GE capital, or one of the outfits that does the box stores. You get your full lick on price, plus your money - they get the headaches, if any. If they can't make it with a financial services bunch (they will finance anybody), you don't need it. I toted the note on a property (60000.00) 30k down and they didn't make two payments or pay the taxes - took two years to get to court - 5 years on the back stuff and they're still in the house. I'm getting my money, but what a headache for 10 percent.

From contributor C:
Ask yourself this question: Am I a banker or a woodworker? I'm with contributor P on this one. Let them figure out how to pay for their non-essential custom purchases. My terms are still: 50% production deposit, 40% before the project leaves the shop, and 10% upon substantial completion of the project. I supply the woodwork. They supply the money.

From contributor T:
You may consider offering a contact to a finance organization as a service, but otherwise I don't recommend that our clients actually become the financial lender. This is another business.

From contributor K:
I had this all worked out with Wells Fargo and another local loan company (12 months same as cash). We were just about ready to start offering the program when both companies called me and told me their corporate offices had waved them off because these were cabinets... nothing they could repossess if necessary. I was interested in doing the program because we're on the gulf coast where Katrina did so much damage and this could help folks get their houses back in shape more painlessly. Everybody needed cabinets and nobody had any money. Otherwise, I think a couple of guys above are on the money when they said to be cautious when someone is trying to finance cabinets.

From contributor L:
I'm with everyone else, just say no. If you take MC and Visa, see if they can do 50% now, 40% installed, and 10% upon punch list. But I just unloaded my trailer of cabs and tops from an ice cream shop that went under... They're driving new vehicles, of course; didn't want to finance them, but they didn't leave me any choice.

From contributor A:
One of the simplest ways to make sales easier is to offer financing and credit cards when selling to consumers (homeowners). Partnering with someone like HFC or Capitol One that have programs in place for vendors is a few hour process, then you give them the brochure, and the finance company handles it and pays you.

Financing owners out of pocket should only be based on you having adequate cash flow and reserves, and you would need to get a security interest. I wouldn't recommend that unless you have very strong cash reserves.

I suggest you focus on sales and any tools that help you achieve making sales, including financing through a third party. You want to take all the hurdles out of the customer making a purchase.