When the housing market slumps, residential contractors are among the first to feel the pinch but Sacramento-based Darius Baker is trying to improve the odds that his customers will still take on costly renovations.
Baker is one of several housing contractors around the country who are now helping to arrange financing for remodeling projects in a real estate market hampered by tightening credit terms.
"I see it as the way of the future," says Baker, whose company, D&J Kitchens & Baths Inc., has partnered with GE Money, the financing arm of General Electric Co., to offer homeowners alternatives to traditional home-related loans from the banks.
"If we really want to succeed at remodeling projects, we've got to make it easier," says Baker, who, along with his partner, manages a staff of 13 employees that focus on renovating vintage homes, some dating back to the Gold Rush years of the 1850s.
The financing products D&J offers to customers sometimes mean they're willing to spend a bit more, says Baking, adding: "The banks are just really getting to be sticklers."
With products such as revolving credit lines similar to credit cards and unsecured installment loans, GE Money is on track to log nearly $2 billion in home improvement financing this year, says Bruce Christensen, vice president and general manager for the GE unit's home improvement business. Some of that business is coming from small companies such as Baker's, who bear no financial risk themselves but must meet GE's strict partnering criteria.
"Contractors are seeing more people looking for financing through them than they have in the past several years," says Christensen. "There is less availability of home equity lines of credit due to the economics surrounding the U.S. mortgage industry and due to flat home values."
GE's terms vary by product and customers' individual credit ratings, but Christensen says interest rates for unsecured loans are running "just shy of the teens" and secured loans are "a little less than 10 percent for better customers." Depending on the product, the approval process can sometimes happen as fast as a car loan, he says.
