Fund your future: Financing options to scale your construction business

Charley Burtwistle:

What is up everybody? And welcome back to another episode of “The Building Code.” I’m Charley Burtwistle.

Zach Wojtowicz:

And I’m Zach Wojtowicz, virtual here. It’s going to be the virtual series is what I’m calling it.

Charley Burtwistle:

Yeah, I’m not exactly sure when we are releasing these, but I do want to call out to our audience that you are not stuck in Arizona for over the course of six weeks. So, we’re recording in a lot of episodes all at one time and hopefully someday you’ll return back to Omaha.

Zach Wojtowicz:

I don’t know, Omaha versus Arizona. Wintertime. I’m not going to lie, for however long I’m being here, it’s not long enough given the snow situation at Omaha.

Charley Burtwistle:

Well, maybe I’ll come fly out and visit you then.

Zach Wojtowicz:

Oh, welcome.

Charley Burtwistle:

All right. Absolutely.

Zach Wojtowicz:

Open the floodgates.

Charley Burtwistle:

And another one of our good friends that we should bring down to Arizona happens to be the guest on today’s podcast. We have Vengan from our financial services team joining us today to talk about some of the lending initiatives and other financial services products that he’s rolling out and helping to roll out here at Buildertrend that are just going to do nothing but benefit our builders and open up more possibilities for them. What should listeners be excited about Zach?

Zach Wojtowicz:

Yeah, Vengan is a director of financial services here at Buildertrend. We actually work together pretty closely, so I’m sure we’ll have just some good old banter about our working relationship. He’s been working on these projects for a good year now. He joined Buildertrend just probably over a year ago to try and enhance our offerings in the financial space for our customers. We know people need financials to run their business and so, his particular area that he’s focusing on right now are really enhancing things like lending products. So, he’s been finding partners and negotiating best rates for our customers. So, I’m sure he’ll talk all about it. Really excited to have him on today and kind of get into it. So, how we can use lending to best support our customers.

Charley Burtwistle:

Absolutely. Well, let’s get him in here and save some fire power for him, but that was a great intro, but we’ll move over to Vengan.

Zach Wojtowicz:

Hey Vengan, welcome to “The Building Code.” It’s exciting to have you here today. We are here to talk about all types of financial services. You’re a director of financial services here at Buildertrend, so before we dive into it, well let’s talk a little bit about yourself.

Vengan Anandan:

Awesome. Great. Well, excited to be here. So, about me, so I’ve spent all of my career in financial services, mostly at American Express where I helped launch many new FinTech products. Before Buildertrend, I was at Anheuser-Busch, which is the largest beer company in the world where I launched a few FinTech products to their small business customers across the globe. So, I joined Buildertrend a little over a year ago through a former VP of mine at AMEX who was brought in to sort of lead our overall financial services strategy at Buildertrend. Overall, our leaders here could really recognize that our customers have strong financial needs and that we’re uniquely positioned to support them. So, it’s a growing focus at the company.

Charley Burtwistle:

Yeah, I think what I’ve been really impressed about getting to work with Vengan is how well you can translate your beer knowledge and the way financial services work there over to construction. Those things for you seem to go pretty, it’s pretty smoothly, hand in hand.

Vengan Anandan:

There’s a lot of overlap.

Zach Wojtowicz:

I was going to say, I think our customers have an affinity maybe that want to know more – how to get the hookup.

Vengan Anandan:

I’m more of a liquor guy myself, personally, that here for the first time.

Charley Burtwistle:

Now that you don’t work at Anheuser, you don’t have to pretend to like their product.

Vengan Anandan:

Yeah.

Charley Burtwistle:

Well, one thing I think would be really beneficial for our listeners out there, they hear financial services, they hear fintech. They may be curious on what exactly that means specifically in the context that works for them. So, we just recently, and by we, I mean Buildertrend and by Buildertrend, I mean you launched several lending options, so maybe you could walk through what lending options builders can choose from and how they apply to put some more context around what you’re talking about with fintech and financial services.

Vengan Anandan:

Sure, sure. So, we have launched two lending options, which are business financing and home improvement financing, and they’re sort of both there to solve unique needs for our customers. So, with business financing, we’re really focused on helping, you as a business get a range of financing options, so you can sort of help better your business through our marketplace of lending partners, and we can support multiple different use cases you may have with capital.

So, these products include lines of credit, term loans, equipment financing and revenue-based financing. With home improvement financing, it’s really more focused on helping you win more jobs. It is a program for builders to offer best-in-class, unsecured consumer loans to your homeowner customers with really the best contractor fee rates in the market, best consumer fee rates, rates on all integrated through Buildingtrend. And so, both offerings are relatively new. We are really looking to improve them and to better serve our customers’ needs. Our goal is really to leverage our relationships with our customers and our unique position in the industry to get the best possible products for our customers, particularly the ones that have been with Buildertrend for a long time. And so, to apply, you can visit our website. There’s a financing section, or you could talk to one of our lending specialists through your coach or your account executive.

Zach Wojtowicz:

Well, I think the big thing that for a builder, a contractor who maybe is a little bit adverse to using lending, I mean, why should a builder sharing customer even consider using credit to actually improve their business. I mean I think there’s kind of a stigma of taking on debt and what debt really can mean. So, obviously, we’ve got best-in-class rates and everything, but what’s, given the current state of the macroeconomics, what are the advantages of using loans?

Vengan Anandan:

Absolutely. So, we definitely understand that the environment is tough, especially with rising interest rates and that directly affects the pricing of financing and just in general the potential downsides to using financing as debt. But there are key benefits, and we do really, really want to make sure that we ensure our customers are using the credits that we provide responsibly and for very specific use cases that will actually better their business. And there are use cases that will allow a builder to better their business with financing. And so, in general, even before talking about financing, especially with the environment right now is generally more important to really run the best business that you can, so you can stand out from your competition and really sort of take advantage of the opportunity that a recession brings. You can really sort of beat out your competition and so, you have to really focus on investing and bettering your business, and financing is simply a tool that can help you do that.

And so, in terms of bettering your business, we sort of put it into two use cases, two buckets. One is investing into your business’ longevity, which is really more important now than ever as I said earlier. So, investing more in marketing, customer satisfaction, your sort of overall service offering. You can do things like redesign your website, you can add more sales headcount to really capture the lesser demand of jobs. Also, diversifying your revenue streams, whether you want to get into remodeling or new home. Really all the activities to invest in your businesses’ longevity, this is something that overall as a business you should be thinking about. And as you start determining what those things are, financing can sort of help you accelerate and get there faster. But as we mentioned before, it’s very important to be extremely thoughtful and responsible with how you take out and use loans.

And this is always the case, whether it’s in a good economy or a bad, we always recommend that you have a clear plan and sort of visibility in terms of how you plan to pay the loans back as this will be really crucial to ensure you can reap the benefits without the potential sort of downside. And so, investing in the business’ longevity and then also just having a lot of flexibility and giving yourself more of that flexibility with the access to credit. We love the line of credit product. This is something that allows you to have a lot of flexibility, and you can sort of adapt to situations as they arise. A line of credit, you don’t have to really pay anything until you actually use it. That’s when the interest will kick in. So, it just has that peace of mind where if there’s a new job that comes up that you want to take on that you may not have cash in the bank from profits to take on, you can draw from your line of credit to do that.

You can essentially pay off subs, vendors faster while you’re waiting for the money to come in and then sort of pay it back once you do get the receivables from your homeowner or from a bank draw. And this allows you to run more efficiently and maintain those relationships with those constituents, so you can keep them as it gets harder and harder to maintain those relationships given the environment.

Charley Burtwistle:

Yeah, I think that’s one of the, not to cut you off, but one of the coolest use cases, maybe coolest isn’t the right word, but most impactful use cases is the ability to pay your subcontractors and employees depending on how you hand out that work, just faster. The interview Zach and I were just doing right before this, we were talking about just the importance of relationships with your employees and your subcontractors. And I feel like if you ask anyone, they’ll say that the hardest thing about the industry right now isn’t necessarily the environment or the interest rate or mortgage rates or anything like that. It’s finding good work and having that line of credit or a loan or something that you can take out and being the guy that always pays on time, nobody’s having to wait around, can be quick. You’re improving those relationships, you’re able to start that next job. That’s something I think is really, really powerful and something that potentially people hadn’t thought of using as a use case before that you’re really, really highlighting here, and I think is really exciting.

Vengan Anandan:

Yeah, absolutely. In construction, there’s sort of a built-in working capital gap where you have a lot of payables that you have to make through these parties like the subs and vendors, but you have to sort of wait for the money coming in, especially if it’s a new home job and there’s bank draws. We’ve seen a lot where there’s challenges in getting that money as soon as possible. And so, drawing from a line of credit, paying those folks on time, so they are happy and confident after they’ve done the work and then just paying that back as soon as you get the money. It allows you to smooth that working capital gap, keep everyone happy and keep your projects and the schedule moving.

Zach Wojtowicz:

And I think that’s a thing that we want to emphasize is in a lot of ways you take that capital, and you can put it back into your business as an investment. It’s not taking more credit to take credit sake, you can use it in responsible ways. A common example is, you can pay your employees faster, but there’s other ways. Equipment, it’s a necessity to run a construction site. And I’ve seen more and more that builders are investing in owning more of the larger equipment to be able to get to projects faster, not waiting for the subcontractor to get to the site to do it. They’re taking on more of that ability to then at the end of the day you’re able to take on more work, which means you’re able to complete contracts quicker, i.e. more real revenue that you’re creating because of that. So, I know when you were designing these, we worked pretty closely together on it. You talked with customers a lot about what they needed.

These were created with customer feedback about areas of opportunity to make sure we’re addressing all use cases. And then the other side is your consumer also benefits from using lending in a lot of different ways. So, what was the working concept of giving more Buildertrend users and their clients products to use for lending options to extend their needs to homeowners as well?

Vengan Anandan:

Yeah, absolutely. This was a huge use case that we’ve heard from our customers and the market when it comes to doing these projects. So, particularly for remodels and specialty projects, sometimes these are pretty large jobs and from a consumer household budgeting perspective, getting your kitchen remodeled, it could cost as much as 50-60K. These larger jobs paying all at once, especially with today’s environment, going back to that, households are a lot more conscious about their managing their household budgets and making sure every single month they are properly budgeting across all of the different things that they need to pay for, whether it’s groceries and everything else. And so, this consumer financing allows those customers to really spread out the cost of these jobs across long periods of time, whether it’s through a year, up to 10, 15 years, which is with our products, it goes as long as.

And so, with this, it allows them to have that flexibility and makes it a lot more affordable, and they can get a better project, they can actually add that extra selection or get what they really truly desire as opposed to having to be too constrained by what they can afford right off the bat in cash. And so, this has been a huge, huge benefit for those consumers, especially with the way we’ve designed it. It’s really, really good rates for them. And typically a lot of consumers have told us in the past that they’ve used home equity lines of credit, but today because of the variable interest rates out there and interest rates going up, HELOCs are typically variable interest rates. And so, there’s been a lot of challenges with that. And HELOCs are also really tied to home values, which are also kind of in in flux.

And so, we found that consumers are really, really preferring and wanting these unsecured personal loans and if they’re offered to them through their builder at the best rates they can, it’s adding a lot of value and allowing them to really get the dream projects they want and without breaking their bank.

Charley Burtwistle:

I know a lot of the work that you’ve been doing leading up to this has been talking to other customers, hearing their pain points, trying to solve and solution for them in the easiest way possible. I think it would be, and we don’t have to get too into the nitty gritty, but I think it is really cool what we’ve been able to do as far as how easy it is to get set up. So, maybe you could talk through that process just a little bit there, so they kind of know what to expect. Because when I hear loan, and I hear applying for loan and lending, I think that’s too complicated. Scary. I don’t want to get into it, but I feel like you and your team have done a really good job kind of streamlining that process to get them up and going really in a matter of days.

Vengan Anandan:

Yeah, absolutely. So, yeah, applying for a loan historically has been very, very complicated, cumbersome, lots of documents. We have created a very easy to use digital application where you can essentially go in, add a couple of things, some information, connect your bank, connect your accounting, and through that you can start getting offers very, very quickly. You can get funded as soon as 24 hours with relatively limited information. But we do advise as part of the process if you’re really serious about getting a loan and getting the best possible rates, there’s a few things you can do to really ensure before you go into the process that you’ll be sort of in the best position to get that best rate. And so, a few things that we advise having sort of clean financial statements ready, having tax returns filed and ready, and then just looking through your financials and looking for things that a lender might consider.

At the end when a lender is considering giving you money, they’re sort of evaluating the risk of your business. And so, anything you can do to really show and present your business in the best light. So, paying down revolving balances you might have, clearing up any delinquencies that you might have, minimizing negative days in your bank statements, things like that. Even looking at your credit report and seeing if there’s any errors or things that are sort of unfamiliar or out of date. You can actually get a free copy of your credit report from, I would recommend www.annualcreditreport.com. You can sort of get a free copy where you can see if there’s any errors. And so, by just doing this due diligence before you go through the process, it sort of will help ensure that you get the best possible deal. And then you’ll start getting lenders actually kind of competing to give you the best rates, which is a great position to be in, so you can get the loan and use it to maximize your business as per the use case as we talked about earlier.

Charley Burtwistle:

We will make sure to … This is my favorite part of every episode, and to say, put that link in the shownotes, so our listeners out there can go, and you don’t have to scramble around for a pen. We can find that and click to go out. And also, on the topic of shownotes, we’ve recently written a couple blogs about financing your construction business, which will also drop down in there as well, too. So, I feel like this is something that, especially in the environment that we are in right now and everything going on, it is an option to explore. Having options, especially for your homeowners, but your business as well is going to do nothing but open doors regardless of if you take advantage of it. So, yeah, really, really exciting stuff in the fintech world here at Buildertrend.

Zach Wojtowicz:

Yeah, I’ve seen it a lot where customers, our customers will take on the whims of their customers in a change order or you touched on in the selections process where they’ll essentially front those overages for their customer, and they don’t document it. It’s a handshake agreement and the contractor has to be able to order the material, gives it the job site, and then the customer, the homeowner is like, “Yeah, I changed my mind,” but now there’s a dispute on how these materials are going to get paid for. And it’s kind of 50-50 of like, well, how that situation goes. Either the homeowner ends up buying it, they have to come to some agreement, it could end up in court, or the GC will eat the cost. So, I guess I’ve seen it all three scenarios. Actually, I remember a builder intimately telling me he lost $50,000 because he didn’t document the process, and it was a huge burden.

Lending options can help address those needs. Have a process that says to the customer when these things occur, here’s how we handle it. You can provide us the money and get us the signature and “Hey, we can even offer you a program to let you get what you want and also pay it back without you having to change your contract.” So, there’s a lot of different ways that you can use credit in a construction world to help protect yourself. Give your customers that best in class experience to say, “We see this all the time, we’ve got a process, we’ve got programs.” And for yourself, you also aren’t having to run into situations that you are left unprepared. Change orders are a great source of revenue for the savviest remodelers and kind of high number of projects, including yeah, a lot of them use these programs to create more business and actually increase their bottom line and give those things what they want because people like to shop. They like to upgrade, it’s fun.

And so, if you’re a builder who is embracing these kind of products, you can really extend what you’re able to offer to your customers, and they’ll love it because it’s convenient, it’s easy to go through the process and it’s accessible in Buildertrend, which ultimately we want everybody to be using the platform for. So, there’s a lot of exciting things that we’ve been working on, and Vengan has been at the heart of all of it.

Vengan Anandan:

Yeah, yeah, it’s super exciting. And at the end we’re really focused on making our customers lives better and resolving their problems with lending. As going back to what you said earlier around the stigma against it, if lending is used irresponsibly, it does sort of have a downside. I’ve used the reference of Squid game quite frequently internally like if you offer it and use it irresponsibly, but that’s not what we’re trying to do. We are really trying to offer options that are additive to our customers that will actually help them sort of survive and thrive and grow as businesses. And that’s really what we’re focused on doing.

Charley Burtwistle:

And I think that’s kind of a tip of the cap to our customers as well, too. A lot of the lenders that we’ve been working with to get this program set up, the reason that they’re able to offer these great rates and best-in-class service is the understanding that companies that use Buildertrend are typically more mature companies that have their processes in order, you’re able to track your financials, so you’re more likely to pay stuff out. You’re able to get paid from a homeowner, so you’re more than likely to collect. And just using Buildertrend as a whole makes your business less risky from a cash flow perspective, which is how we’re able to leverage the fantastic rates and service that are provided. So, it’s really without our customers and the Buildertrend users being as fantastic as they are, is really not something that we’d be able to offer and why anyone, no one else can. So, I’m starting to get a little salesy here, so I’ll tone it back, but yeah, and I never thought I’d be this fired up about lending, but here we are.

Zach Wojtowicz:

What I really want to know is do we get any perks, best-in-class rates for internal Buildertrend employees? We’ve got two, Vengan, so let’s work a little magic.

Vengan Anandan:

Are you in the market for a remodel project?

Zach Wojtowicz:

Hey, anybody in the Omaha Metro? Actually I am. I was actively looking, so hit me up. Hit me up.

Charley Burtwistle:

Well, I think Zach’s not in the office to watch the clock for me, so I’m a little new at this, but I think we are about at time. Vengan has been absolutely fantastic talking to you as always. Any last words as you kind of sign off for our listeners?

Vengan Anandan:

Yeah, I think at the end, the environment right now is tough, but everything that you can do to really focus on capturing your own market and making your business better and more efficient, which includes multiple different things, the more you can do that, the more you’ll survive, beat out your competition. And if you’re looking to invest in certain things, lending is a great option, and we have great offerings for you. And so, at the end, Buildertrend has your back, and we really want to make you guys win because when you win, we win.

Charley Burtwistle:

There we go. Well, I think that about does it. Vengan, thank you so much.

Vengan Anandan:

Thank you guys.

Zach Wojtowicz:

We just had Vengan here on “The Building Code” talking about our new financial service products out there. Charley, you taking out a loan, you need something?

Charley Burtwistle:

I honestly might, if I can get the nice line of credit offering that he was mentioning with no limits, that would be fantastic. I’ll head back to Vegas, see if I can put it to work. I don’t know what I’d spent. No, just kidding. But no, the …

Zach Wojtowicz:

Opposite of what we talked about when using lending responsibly.

Charley Burtwistle:

Yeah, responsibly …

Zach Wojtowicz:

Start here. Like don’t take all the risk. I’m going to Vegas to spend money.

Charley Burtwistle:

Yeah. Vegan hopped off the call. The first thing I say is I gamble it all. Yeah, we may have to cut that, but no, I thought it was an awesome interview. I think that Vegan has such a unique perspective into not just how the lending industry works, but the way that the construction industry works. He’s really kind of bringing the best of, I don’t know if I’d want to call them stubborn industries, but kind of historically set in their ways in very set processes and coming at it from a fresh angle, from the experience that he brought it, the prior companies he’s been at, and really reinventing how easy lending can be both for business lending as well as homeowner offerings as well too. So, it’s cool listening to him talk about it because you can tell he is passionate and every time I’m around him, I end up getting pretty fired up, too. So, yeah, I thought it was a great interview.

Zach Wojtowicz:

And perhaps the greatest Instagram handle in the game, which is …

Charley Burtwistle:

Ven …

Zach Wojtowicz:

Not vegan.

Charley Burtwistle:

Vengan not vegan. Yeah. Give him a follow.

Zach Wojtowicz:

He’d love to hear it.

Charley Burtwistle:

I think this might be the first time we’ve promoted someone’s Instagram on the pod, but yeah, he’s great.

Zach Wojtowicz:

We’re going to find out if they keep it, going to test those boundaries on the editor floor. Yeah, thanks so much for Vengan for coming on. Buildertrend’s always actively looking to expand our offerings for our customers. We’re obviously a software vendor that helps you streamline your business, but we want to also really expand a lot of processes for our customers. So, we’ll continue to bring those things to our customers. And again, it’s all based on feedback of what we hear from our customers. These are things that our customers success reps talk about consistently with their clients that they’re closest with, which is the nuances of running a construction business, and it’s a part of that. So, really great to have an internal person on and talk about those things. And if you want to know more, I know, I know we’re going to put it in the shownotes, right, Charley?

Charley Burtwistle:

Hell yeah. Always in the shownotes. Otherwise-

Zach Wojtowicz:

Always.

Charley Burtwistle:

Otherwise, make sure to like, review and subscribe no matter where you’re listening to. Check us out on YouTube and join The Building Code Crew on Facebook. I think I got all the things I needed to say.

Zach Wojtowicz:

Check, check and check. I think when we’re apart, we’re better.

Charley Burtwistle:

Yeah, maybe, maybe that’s your sign to just kind of stay down there. Sorry. Rude, rude, rude. Until next time, I’m Charley Burtwistle.

Zach Wojtowicz:

I’m Zach Wojtowicz.

Charley Burtwistle:

We’ll see you.