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Easier financing helping recovery

Lending practices still affecting the size of projects, delaying others, but financing is better than it was two years ago.

May 06, 2013
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When we last conducted a financing survey in early 2011, the lack of lending put a stranglehold on the remodeling industry. The financing challenges slowed recovery for the entire year, ultimately leading to employee layoffs, reduced and cancelled projects, and diminished marketing efforts by remodelers.

Jump ahead to 2013, the remodeling industry has begun to turn the corner as lenders have loosened their grip on financing, resulting in the number of remodeling projects slowly increasing, according to the latest Professional Remodeler financing survey.


189 remodelers answered the survey via Internet in April 2013. Participants were a random sample of subscribers to Professional Remodeler print and digital editions.

Financing issues are still having an impact on the size of some remodeling projects as well as delaying the start of some projects.

Financing still difficult but better than 2011

How remodelers are managing financing challenges

We asked remodelers how they are addressing financing shortfalls. Here’s some of what they had to say.

- “Increased and better management of projects.”

- “Met with lenders and appraisers to discuss the problems.”

- “Continue to look for banks that are interested in financing.”

- “Sought projects without financing problems and personally financed company operating funds.”

- “We have tried to align ourselves with lending professionals who can help our clients get the money they need to do their projects.”

- “Educate lenders on renewable energy projects, both remodels and new construction. It allows the owner to be able to reduce/eliminate utilities and put that money toward repayment.”

- “We have not expanded our operation to keep overhead at a minimum and gross profit at a maximum.”

- “Budget forecasting and constant attention to funds.”

- “Maintain and improve credit ratings, although credit rating system does not reflect actual credit worthiness or good business sense.”

Financing continues to play a major role for most remodelers, with 83 percent saying at least some of their clients finance their projects. Of those, only 9 percent have been unaffected by problems with financing.

“Our firm has been hit very hard by loan requirements that have become moving targets for our clients. They have shelved, or canned, the projects as a result,” says one Wisconsin remodeler.

Although some of the projects are indeed getting smaller, delayed, or cancelled because of lack of financing, it is not at as large a rate when compared to our last financing survey in 2011.

Forty-one percent of remodelers who finance projects report clients are reducing project size, while 30 percent said they’ve had clients cancel projects altogether. In 2011, 66 percent of remodelers indicated clients were reducing job size, while 59 percent reported they had clients cancel jobs. In 2013, 18 percent said projects are taking longer to put together and complete compared to 30 percent in 2011.

Remodelers continue to see a relatively even split between projects that are financed and those that are not—45 percent of clients pay from cash or personal savings, 45 percent obtain their own financing, and 10 percent get financing arranged through the remodeler. In 2011, 50 percent of clients paid from cash or personal savings, 45 percent obtained their own financing, and 5 percent arranged financing through the remodeler.

“We’ve been pushing banks to open up monies for building and remodeling,” says a Midwest remodeler.

“We are training sales staff to be much more knowledgeable about financing as well as discussing the issues about financing with clients much earlier in the selling process,” says an Illinois-based remodeler.

The effect financing challenges are having on business varies, but 16 percent of respondents to our survey said more than half of their projects having been affected by financing challenges—with 6 percent have had 75 percent or more of their projects impacted. Another 24 percent had problems with 25 to 50 percent of their projects, while 59 percent said it had affected less than a quarter of their projects.

Slightly optimistic about financing

As a whole, remodelers are slightly optimistic the financing climate will get better in 2013. Thirty-one percent expect financing to be more difficult, 28 percent expect financing to be easier, and 41

percent expect no change in the level of difficulty in obtaining financing. Have remodelers had trouble financing or credit to run their business?

Sixty-one percent indicated they had no problems, 39 percent indicated they are having problems.

“The lack of funding has made running our business much, much harder,” says a Midwest remodeler.

“It’s been really hard to make ends meet; we just do what needs to be done to keep ourselves in business,” says a Maryland-based remodeler.

“The only thing we feel like we can do is wait it out until the economy picks up and the banks in our area let up on the tight view they have,” says a Pennsylvania-based remodeler.

How has the lack of credit impacted remodelers? Twenty-four percent have reduced the number of employees, 23 percent delayed purchasing equipment, 22 percent have been unable to market their business effectively, and 17 percent delayed acquiring property. PR

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