What is funding when it comes to deductibles and why are funding services taking the contracting world by storm?
Deductibles from both sides of the aisle are a huge problem. If you’re a homeowner a deductible basically ties your hands and makes insurance claims a tremendous hassle. As a homeowner, you can’t fix or repair any damage until you’ve paid your deductible. Period. There are no two ways about it. If, on the other hand, you’re a contractor, you can’t unlock an appreciation unless you can prove that the deductible has been paid. Most states nowadays need proof of payment to allow a contractor to access funds.
There are 5 ways to deal with a deductible:
- Not legal: anything that can be considered a crime.
- Insurance fraud: exactly as it sounds. Maneuvers a contractor and a client perpetrate to pull the wool over an insurance company.
The first two can lead to a mountain of issues and a legal minefield, and are to be avoided.
- Pay in full: The homeowner has to pay the deductible right on the spot. Every red cent. In many cases thousands of dollars.
- Financing: a homeowner manages to agree with their bank, lending institution, or their insurance company to finance their deductible. These include processing fees, and financial rates, and interest payments.
- Fund it: it’s very similar to financing but the money is usually provided by private companies for a specific purpose, not by a financial institution.
This last option, given the way the market moves, is the best one and most beneficial to all parties.
How does funding a deductible work?
From a contractor’s perspective, they are handing over all the minutia and legal paperwork to a funding company. The company is the one that for a monthly processing fee and non-fluctuating interest rate does all the heavy lifting.
Funding is a contract done between 3 parties. The homeowner, the company, and, finally, the contractor. Most companies, like Fund My Deductible, have streamlined the process. It’s done through a website or even an app.
This allows homeowners that have to deal with the monetary burden of a deductible a perfect way to meet their responsibility and be able to hire top talent for their property.
A funding agreement, in terms of paperwork, is incredibly easy and simple. The homeowner and the contractor simply fill out an agreement, with payment draft dates and conditions. Both parties accept the terms and the contract begins.
Benefits of funding
One of the great benefits of funding for homeowners is that there are no qualifying terms. No credit checks no minimums.
For a contractor, this last benefit translates to no awkward conversations or the need to track down clients for information. They won’t have to interfere with their client’s personal life.
But, let’s organizes the advantages of funding in bullet points and easily digestible facts:
For homeowners, the benefits are:
- No minimum.
- No qualifying terms.
- No credit checks.
- Customized monthly payments that make sense to both parties (contractor and homeowner). If at any time the homeowner decides they want or can pay the whole deductible, a funding service grants them a convenient option for that circumstance.
- No documentation.
- Funding allows for the homeowner to continue to build their credit.
For contractors, the benefits are:
- Won’t have to turn down a job.
- No tedious documentation.
- All parties are informed.
- Residual income since deductibles are pure profit.
Monthly payments that are easy to meet. That’s the other amazing benefit when funding a deductible. Also, there’s no minimum, only a minimum monthly payment of 1% for the homeowner. Payment terms and conditions are tailor-made. The contractor and the homeowner shake hands on a legally binding agreement that makes financial sense to both of them.
Paying a deductible over time is much more convenient for homeowners. It allows them to meet other financial demands while making sure of clear-cut rates and plans. A company like FDM has automated the service and made it easy to use, and, more important, compliant with the law.
Everyone benefits
Since funding is different from financial assistance or a loan, there are no impediments nor barriers. It allows the contractor to grow their business and helps them win more jobs, while also protecting the investment they made in manpower and time. It also permits homeowners to meet key requirements and have complete control over their economic plan.
The best way to organize a process of this type is with the help of a third party. A funding service with a foolproof platform and services that does most of the work. That’s on top of payments, and compliant with the law.
An app or website, like FMD, allows complete minute-to-minute tracking of the contract and every stage it’s at as well as its performance. Both parties can view how much time has transpired, how much funding is left to pay, when is the next date of payment, and dozens of other critical points of interest.
