Stop Offering Payment Plans — You're Not a Bank

The Job Is Done. You Don't Get Paid for Thirty More Days. Congratulations.

You say "just give me $200 a month" and the job is already done. Your labor is in the walls. Your materials are on the invoice. You've been paid in full by your own checking account — and then you handed the money back. No interest. No collateral. Nothing in writing.

Here's the number: how long could you pay your guys, your truck notes, your insurance, and your fuel with zero new revenue? Go look at the bank account. Do the math right now.

If the answer isn't ninety days, you cannot afford to be someone else's lender.

October 2008. Smith Mechanical's receivables went from forty-five days to a hundred and ten in about six weeks. I felt it on a Tuesday when payroll was Thursday and I had $87,000 on paper and $19,000 at the bank. The informal payment arrangements I'd made on the residential side — three customers, nothing in writing, total around $18,000 — weren't callable. No mechanism. Just wait.

I had twelve guys. Weekly burn was around $28,000. That $18,000 wasn't sitting there doing nothing — it was the difference between Thursday happening and calling the bank.

I laid off four men. Guys I'd told directly I was building something worth staying for. That part stayed with me longer than the money did.

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You're Not Being Generous. You're Being Slow About Saying No.

The contractors most likely to offer payment plans are the same contractors most likely to price against the market instead of their own costs. Same problem. You bid $4,200, the homeowner flinches, and you fold — either on the price or on the terms.

The shop that built its rate off a flat-rate pricing book subscription is starting from a margin it doesn't own. That number came from someone else's cost structure. If your overhead doesn't match the assumptions in that book — and it probably doesn't — you're already underpriced before the customer opens their mouth. When that same shop says yes to $150 a month for eight months, they're borrowing against a margin they never had in the first place.

Donny Ferraro, the foreman I apprenticed under at Beacon in Framingham, said feeling bad about a decision isn't the same as the decision being wrong. Usually said it after I'd done something stupid to avoid a hard conversation. Took me fifteen years to actually use it.

Saying no on the driveway feels worse than it is. It always does.

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What October 2008 Actually Taught Me About Carrying Other People's Cash

Two builder accounts dropped me the same week. Not because of bad work. They just stopped building. The phone went quiet in a specific way.

I had six trucks, twelve guys. The builder receivables were already stretched — sixty days, seventy-five days, we'll get you squared away at the end of the phase. Then there was no phase. Just the number. Money I was owed by companies that were waiting on banks that were waiting on things that hadn't resolved yet.

The informal residential payment plans looked small next to the builder receivables. They were small. But small doesn't mean nothing when it's Thursday.

Two of those three residential customers lost jobs in early 2009. The payments just stopped. No call. I never filed anything. Figured the relationships were worth more than the money. I was wrong — the relationships disappeared too.

The rebuild starting in 2009 was service-only. No builders. No long receivable tails. COD where I could get it, thirty days max where I couldn't. If a customer asked about payments, the answer was no. If they couldn't pay at completion, we talked before the job started — not after I'd already put three hours into their basement.

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The Contrarian Position: Sometimes Financing Is Fine — But Not the Way You're Doing It

Large-ticket planned work is different. A homeowner looking at a $9,000 boiler swap doesn't always have $9,000 in a checking account, and if you can't offer them a path, someone else will.

The difference is who carries the risk.

GreenSky is the one I've seen work. Third-party lender — they pay you the full invoice on day one, minus a program fee, and the customer repays them. You're done. You price that fee into your flat rate before you ever walk in the door, same as any other cost of doing business.

The version that kills you is when you say "just give me something each month" with no lender, no interest, no recourse. You're the bank. With no underwriting. And no plan for when the payments stop, because they will stop.

If you're already running off a borrowed margin from someone else's pricing book, adding an informal payment arrangement on top is how a shop gets to zero without seeing it coming.

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What Whitman Builders Taught Me About "Next Friday"

In 2011 I was owed $61,000 by a builder named Whitman out of Marlborough. Next Friday. Almost done with the closing. You know how it goes. I kept working. He paid me 38 cents on the dollar in the bankruptcy.

Whitman made a rational bet every Friday for about four months: I would not lien, would not stop working, would not force the issue. He was right, right up until the point where being right didn't matter anymore.

The residential customer who asks for a payment plan is running the same bet at smaller scale. They're counting on you not wanting the confrontation more than they want to not pay. Every month you let it go, it gets cheaper for them and more expensive for you.

I fired what was left of Whitman in late 2011 and slept better. The fear going in was bigger than the consequence coming out.

The account you're scared to lose is rarely worth what you're spending to keep it.

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What You Do Monday

Write a payment policy this week. One page. Card on file before work starts for anything under $1,500. Anything over that: fifty percent deposit before you show up, balance due at completion before the permit card gets left on the water heater. No balance, no permit card. Pick the threshold and hold it. Don't adjust it every time someone pushes back.

If you want to offer financing, call GreenSky this week. Get approved as a contractor. Understand what the program fee actually costs you. Build it into your pricing before you present it — not as an add-on. You get paid day one. The lender carries the risk. That's what lenders are for.

Pull your open AR right now. Anything over forty-five days gets a phone call today. Not an email. If the answer is "can I do payments," send a certified letter with a deadline — same move as the Pennsylvania plumber situation I wrote about before. Specific invoices, specific amounts, seven days, clear statement of what comes next. Then follow through.

Monday. That's it.

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FAQ

If the job is done and the customer genuinely can't pay, what are my options?

Three. Negotiate a lump sum settlement now — take less, close it, move on. Send a written demand with a hard deadline before you involve anyone else. Or file a mechanics lien if you're still inside your state's deadline — in most states that's four to six months from last work, but look it up, because you may be closer to the line than you think. Waiting and hoping is how $18,000 becomes a write-off. I know because it happened to me.

Is it legal to require a card on file before I start?

Yes. You're a private business. You set your terms as a condition of service. Customers can decline and find someone else. Most won't. The ones who push hardest on a card on file are occasionally the ones who were planning to push back on the invoice. That's information worth having before you've put four hours into their crawlspace.

What's the actual difference between GreenSky and just letting someone pay monthly?

With GreenSky, you get paid in full on day one. They pay your invoice. The customer repays them. You eat a program fee, which is a real cost you price in upfront. When you let a customer "just pay over time" with no third party involved, you're the lender — no underwriting, no interest, and no legal structure behind you. One is a financial product. The other is a handshake.

Won't asking for a deposit cost me jobs against guys who don't ask?

Maybe one or two. The ones who walk because you asked for fifty percent upfront are the same ones who'd have argued the invoice at the end. I've talked to shops that went to a deposit model and lost some price-shoppers and picked up customers who wanted to work with somebody who had a process. A deposit signals you run a real operation. Most homeowners have paid a deposit to a cabinetmaker or a landscaper. They know what it means.

At what job size does third-party financing make sense?

Under $3,000, just collect. Card on file, deposit, balance at completion. Between $3,000 and $5,000, having financing available as an option is useful — some customers want it and it can close a job you'd otherwise lose on sticker price alone. Above $5,000, especially on planned replacement work, it's almost expected. The rule in all three cases: price the program fee in before you quote, not after you've already won the job and the customer mentions monthly payments.