Few remodeling companies, it seems, did not watch projects wither on the vine in 2009 when their clients found they couldn’t (or wouldn’t, due to a sudden onset of cold feet) secure the financing to pay for them. Until the banks resume lending, you may need to dig deeper — within your clients’ finances, your lending partners, and your own comfort zone — to get those contracts signed.

Cash has regained currency in this precarious lending environment, and not just because it’s a sure thing. In its third-quarter 2009 consumer sentiment survey, ServiceMagic* found that 72% of homeowners paid cash for their most recent home improvement project, and 85% of them preferred this method of payment.

In some cases, financial insecurity has fostered a bit of a bunker — or maybe a mattress — mentality. In November, Traditions Custom Cabinetry, of Largo, Fla., launched a “same as cash” offer — no cash down, no interest ever — through one of its cabinet lines. “We expected that as many as 50% of our clients would at least be interested,” owner Gary Nesslar says. But the offer has gotten very few bites. “The theme has been that they have already saved for it and don’t want to take on any new debt.”

But what if your clients don’t have $7,461 (the average amount that ServiceMagic respondents spent in the third quarter) in cash lying around? What if you still want to sell larger projects, and your clients don’t have $70,000, or $700,000, lying around?

The Money Talk

Given the uncertainty of it all, the first rule of this precarious lending climate might be: “Don’t ask, don’t sell.”

At his first meeting with prospective clients, remodeler Allyn Harth, of Harth Builders asks in this way: “Where do you plan to get your money?” If their response is a casual, “Oh, we’ll go to the bank,” he encourages homeowners not to delay, as credit is tight, and recommends a specific bank if they don’t have one in mind.

You might need to educate yourself to have this conversation with confidence. “Consumers are looking for someone to show them how they can pay for it in the most favorable way possible,” says former Airoom Architects & Builders executive Seymour Turner, who is now with Cubit Partners, a consulting firm in the building materials space. “The contractor should be as confident talking about consumer finance as he is talking about installing windows.”

“Having the money talk early in the sales process is so critical,” agrees Chris Landis of Landis Construction, in Washington, D.C. His company’s projects tend to skew large, and “almost everybody gets a construction loan,” Landis says. But those six-figure loans now come at a much steeper cost than his clients might have anticipated: They take longer to close, charge higher interest, and often require borrowers to have much more equity in their homes.

Helping prospects understand their payment options “eases up the conversation and brands me as an expert,” Landis says. This is especially true when he points homeowners to specific lenders and helps them understand that home-related loans are tax-deductible and therefore will actually “cost” considerably less than paying cash.

Know Your Banker

Harth and Landis are longtime proponents of a practice that they highly recommend to their remodeling peers: monitoring the banker circuit.

“The biggest thing a firm can do now is to go out and check the banking market,” Landis says. “For a while, most banks were frozen or getting rid of their construction financing teams.” But some banks — especially community banks that avoided getting mired in the mortgage mess — are lending happily. The Landis website even links to preferred banks, under its “ financing” tab.

Harth screens banks as rigorously as some remodelers screen leads. “I’ve probably interviewed 20 to 25 banks, and narrowed the list down to about a half-dozen who meet my requirements,” he says. He asks about loan types (construction? home equity? refi?), terms, points, closing costs, and then refers prospects accordingly. One such referral salvaged a $700,000 addition project for a client who couldn’t find financing elsewhere.

Another benefit of knowing your banker: knowing whether your prospect is qualified. Several remodelers interviewed for this article hear back from their local loan officer when they send prospects his or her way. “He’s had the whole financial discussion with them, and can tell me how much they’re approved for,” Landis says.

Landis, in turn, can compare that budget with his estimated project costs and can “value-engineer” the project accordingly.