Should Your Roofing Company Offer Financing? What It Costs and What It Closes

I am going to show you a number. It is $900.

That is what a 6% lender fee costs you on a $15,000 roof when you offer financing for your roofing company. At a 30% gross margin, that job was going to make you $4,500. With the fee, it makes $3,600.

The 6% is an example. Your fee is the number in your lender's agreement, and the math in this post runs on your number, not mine.

Roofing contractor financing can close estimates a homeowner would otherwise sit on. It also charges you on roofs you would have closed anyway. Whether it pays comes down to one comparison.

You have probably lived at least one of these:

• •The homeowner liked the price and said she needed to think about it.
• •A competitor advertises "financing available" and you do not.
• •You offered financing once, never tracked it, and cannot say if it paid.
• •A fee came out of a job's margin and you did not notice until the books closed.
• •You are guessing whether it closes more roofs.

Most of those come down to missing numbers. Here is the math that settles it.

What Financing Actually Costs You

A lender that finances your customer can charge you a percentage of the financed amount, called a dealer fee. The lender takes it out of what it pays you, and the homeowner repays the lender over time.

The percentage is not fixed. Published figures run from a few percent into double digits, and they come from lenders, so use the number in your own fee sheet.

In many programs, a lower homeowner rate comes with a higher fee to you. Check the fee sheet for every product you would offer, and ask whether the program charges a percentage, a flat fee, or both.

Dealer fees have also drawn scrutiny from regulators and state attorneys general in home improvement and solar financing.

Whether and how a fee can be reflected in your pricing depends on your lender agreement and your state. Ask your lender and a lawyer. This post does not give legal advice.

Here is the arithmetic on one job. These are round numbers, not industry figures. Replace the fee column with your own.

The job carries $10,500 of direct cost in every row. Only the fee moves.

Read the share, not the percentage. A 6% fee sounds small, but against a 30% margin it takes one dollar of every five in job profit.

That is one more way a roofing company ends up keeping so little of what it earns. Give the fee its own line in your job costing so it cannot hide inside a payment total.

What It Closes

The fee is a certain cost. The extra signed roofs are a possible gain. The break-even compares the two.

Here is the part that surprises owners. The fee applies to every roof that goes through the lender, including the ones you would have closed anyway. A homeowner who was going to pay by check and takes the lender's offer instead costs you the fee and brings you nothing new.

So the cost is not the fee on the extra roofs. It is the fee on the roofs you already had. The extra roofs have to pay for those.

Here is the formula: extra roofs needed = (A × F) ÷ (G - F).

• •A: roofs you would have closed anyway. — Signed roofs per year that go through the lender whether or not financing won you anything new.
• •F: fee per roof. — Your lender's fee in dollars on the average roof. 6% of $15,000 is $900.
• •G: gross profit per roof. — Price minus direct job cost, before the fee. In the example, $4,500.

This example is not a benchmark. You close 60 roofs a year without financing, and 20 of those homeowners would take the lender's offer. Your fee is $900 and your gross profit per roof is $4,500.

• •Fee on the roofs you already had: 20 × $900 = $18,000.
• •What each new financed roof keeps: $4,500 - $900 = $3,600.
• •Extra roofs needed: $18,000 ÷ $3,600 = 5.

Five more roofs on 60 is about an 8% lift. If financing wins you four, you lost $3,600. If it wins you six, you made $3,600.

Same job and the same 20 financed roofs in every row. Counts are rounded up to whole roofs.

The Break-Even Test

You do not need a model for this. You need last year's lost estimates and your lender's fee sheet.

1. 01.

   Pull last year's lost estimates.

   Every estimate you sent that did not sign, including the ones that went quiet. Your estimate log, texts, and email will have most of them.
2. 02.

   Mark the ones that stalled on payment.

   Count only the estimates where a note, a text, or a recorded call shows the homeowner raised payment. Leave out the ones who hired a cheaper roofer. A payment plan rarely wins those.
3. 03.

   Apply your fee.

   Get the lender's actual fee in writing for the loan product you would offer. Multiply that percentage by your average roof price. Subtract the result from your gross profit per roof.
4. 04.

   Count your financed roofs.

   Estimate how many of last year's signed roofs would have gone through the lender even if you had signed them without financing. Be honest. That number is A in the formula.
5. 05.

   Run the break-even and compare.

   Plug A, F and G into the formula from the last section. Then set the answer against the stalled-on-payment count from step two.

Here is the comparison in the example. The break-even is five extra roofs, so a list of 30 estimates stalled on payment means financing has to win about one in six.

A list of 8 means it has to win more than half. A list of none means the lender has nothing to unlock.

If the stalled estimates, at an honest win rate, fall short of the break-even, financing does not pay at that fee. Look for a lower-fee product and run it again. Keep the fee next to your price and direct cost, the way a line-item estimate keeps your margin visible.

When Not to Offer It

Sometimes the math says no. Offering financing without running it is the failure.

• •Thin-margin jobs. — The fee comes out of gross profit, so a thin margin leaves less room for it. A $15,000 roof at a 20% gross margin makes $3,000. A 6% fee takes $900 of that, which is 30%. The same fee at a 30% margin takes 20%.
• •Small repairs and small tickets. — Ask whether your program has a flat charge or minimum, because either would weigh more on a small ticket. Then check whether any of your small lost estimates stalled on payment.
• •Markets where payment is not the objection. — If your lost estimates stall on trust or timing, a payment plan is unlikely to fix either. If the stalled count is near zero, the answer is no.
• •A full calendar. — If homeowners sign without raising payment, you would be paying fees to win jobs you already win. A competitor advertising financing is not a reason. Your lost-estimate list is.

When the stalled count clears the break-even with room to spare, offer it and track it. How you bring it up matters as much as the fee, and how to handle the moment she goes quiet covers that.

Financing is a fee you can measure against the roofs it closes. The Search-to-Booked Roofing System™ is the investment with a measurable return. Call tracking shows which booked estimates came from where, so the volume behind your break-even is a real count and not a guess.