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Everything contractors need to know about renovation loans

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Benefits of using renovation loans

  • Allows you to offer financing as an alternative on jobs you have quoted where a customer is unable to pay cash
  • Provides financing options that do not skim a percentage of your sales off the top (zero contractor fees)
  • Reduces reliance on builder lines of credit
  • Enables homeowners to amortize renovation costs over the duration of their mortgage (e.g. 15 years, 30 years) vs. shorter terms (e.g., 6, 12, 18, or 24 months) with higher payments via consumer financing which makes home improvements more affordable
  • Requires project completion as a term of the homeowner’s mortgage; homeowner cannot cancel job
  • Guarantees payment (as long as job is completed satisfactorily) with funds held in escrow
  • Opens up opportunities for more referrals via new relationships with real estate agents, inspectors,  Consultants, etc.

Contractor Credentials Required

Copies of your licensing and registration (if required), Certificate of Liability Insurance, Worker’s Compensation, and any specialty certifications (i.e., lead-based paint, mold, asbestos, radon, etc.) will be required along with a fully executed IRS W-9 Form. For more information, see the flyer below.

Bid Requirements

A bid on your letterhead with the homeowner’s name and property address will be required. Fully describe all work and the location of the work being performed. Labor and materials must be itemized for each work item. Blend any overhead and profit, taxes, etc. into the line items; do not itemize these separately. Identify which permits are required and their costs. For more guidance, see the flyers below.

Draw Process

The draw process for each renovation loan program differs. An initial or materials draw may or may not be allowed. For more detailed information, see the flyers below. Questions? Call me at (844) RENO-GAL.

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