If you are like me, a practical person with a very mild hint of creative mania then understanding how the ever widening array of solar financing products work can be tricky at best, mildly boring at its worst.
However, no one in the Australian solar industry can overlook the growth rates and new business opportunities that solar finance is bringing.
I get that financing solar can open new markets, fits with the increasingly financially driven solar buyer and frankly, most solar businesses need an offer in their suite. In our previous story on solar finance we also talked about how it can help by making higher end products more affordable and drive more quality into solar offers.
However, whilst some installers and retailers I talk to about the issue of finance understand the need and benefits not everyone understands how to sell finance well; there are a variety of products and techniques and laws that need to be taken into account. There’s a bit if a “secret art” to successfully selling solar with finance.
So, I asked a clever financing type bloke by the name of Jay (from the Clean Energy Finance Division of the Classic Funding Group) for a few tips that I could share with you. Here’s what he told me.
SbS: Why is it that we don’t seem to be seeing much action from “the big three” banks but rather boutique solar finance specialists like CCEF dominating the space?
CCEF : The big banks have been active in the large scale projects. However, it has been hard for the banks to get involved in individual consumer transactions, as they are too small for the banks to enter into economically, and to date the emerging market for the smaller commercial installations has not been big enough to be a serious opportunity.
In the smaller commercial market we are starting to see some of the banks becoming more involved, but it is slower in the consumer space where the small deal size and lack of point of sale systems are still keeping the majority of the banks away. Fortunately, we are a genuine alternative to the banks as we are the lender with competitive pricing and scalable funding.
SbS: So I’m Joe’s Solar – what is the first bit of advice you would give me when I start looking at offering a finance product to sell solar?
CCEF: Great question Nige. Before I answer it directly what we are seeing out there is that a large number of solar companies don’t know what they don’t know, and why should they. The landscape today is very different to a few years back. As we well know the market has grown on the back of a raft of Government Rebates and incentives. Sales consultants have become accustomed to selling around these programs and using the time pressure associated with the program ending, the subsidies available and cash sales to help close the deal and hit sales targets.
At the same time the market has been focusing on selling technology. The market is now mature and has become commoditized. Traditionally as markets have become commoditized the choice that many sales teams face is to compete on price and squeeze margins or evolve their proposition to become more focused on long term benefits and selling solutions. One way to achieve this is to integrate finance, which requires a new approach. But to answer your question Nige: the four key areas to understand about your finance provider would be:
SIMPLICITY OF THE PROCESS: Does the provider have the systems and the processes to enable the finance to ‘just happen’? Will approvals be instant and the paperwork simple and fast? Will it work whether the sales team are in the house or in their call centre?
The feedback that we have had is that some of the early providers that offered green loans and solar finance were just not geared up to service solar sales teams at point of sale. So while they offered finance with longer terms or low rates they needed to extract so much personal financial information to get the deal set that the take up by customers was low and sales teams were too concerned that the delayed decisions could actually lose the sale to integrate finance into the sales process. We have seen that the longer you have to wait to get the finance approved, the higher the risk is that the deal will not happen.
At CCEF the application, approval and documentation is all online. Approvals and decisions are instant so the sales agent can actually progress the sale and stop the customer shopping around. A bit like applying for a credit card, but with even less fuss and time.
SIMPLICITY OF THE PRODUCT: Is it easy to explain to customers? Do they get it straight away? At CCEF we offer a simple Loan and Own product. No deposit, no merchant fee, no balloon, no ongoing fees and charges, – just fixed monthly payments till the end of the term.
COST OF THE PRODUCT : Both from the vendor’s and customer’s view point. Zero Interest type products are either expensive for the vendor or result in inflated costs to the customer. They require vendors to pay merchant fees or other fees to cover the “interest”. The problem with these products is twofold
1. There’s a cost to the vendor to pretend the deals looks like there is no interest which reduces your margin (–and there is not heaps of margin going around)…..Or even worse
2. The cost of the system is increased to cover the “interest free subsidy” which can make your product look expensive against your competitors.
At CCEF we believe in zero cost to our partners, and a totally transparent and simple product and application process where there is no difference between the cash price and the price of a financed system. Also you or the customer needs to look at the all in cost. Often lenders will quote a low interest rate but charge monthly account or other fees which inflate the cost.
TRAINING : Does the finance provider understand my business and my market and are they capable and resourced to train the sales consultants to use the product ? The finance product and the process to execute a deal need to fit within the current culture and environment. It takes time and true partnering to make it work.
Using finance to sell more is not like taking a product off the shelf and just offering it up as a bolt on. It takes time, and planning and often a change in the way the proposition is presented.
SbS: So, what have you done to make solar financing easier?
CCEF: We have built a team and a methodology to help our partners alter the way the solar proposition is presented. We guide partners away from a purely technology sale and a discussion about panels and inverters (homeowners actually don’t care so much).
We focus on a solution sell involving patience, understanding, rapport build, open ended questions, trial closing, painting a vision, building long term value, and best of all ‘creating long term customer relationships’.
Premium partners receive professional sales training, use of our Quote and Proposal sales tool, an opportunity to market a financial product that ensures a long term relationship with the customer and a dedicated Account Manager. The most successful partners typically have strong sales management, clear goals, and well trained sales teams.
So, we’ve worked really hard at streamlining the process and developing a suite of products and services that suit different solar companies and markets; we think that’s crucial.
SbS: What’s the key to selling solar finance solutions to Australian buyers?
CCEF: It’s not actually about selling finance. It is about using low monthly payments to create a solution where the energy savings will either cover the costs or heavily subsidise the loan repayments over the term of the payment plan and then the customer enjoying the benefits of the solar system for the balance of its life.
It is about taking pressure off of the crazy low price per watt and instead focusing on what the customer will be achieving over the medium to long term; especially as payback periods are getting shorter all the time.
It is about delivering a solution that will last and creating the opportunity for the vendor to be able to go back to their customer, who is locked into a financial solution, as technology changes and storage or other developments become more affordable to upgrade and improve systems. It is about having a long term relationship with your customer not about selling a piece of technology and never speaking to them again.
We’ve seen the analysis and seen the damage that results when products, support and long term views on customers aren’t valued enough; just look at the customers whose suppliers have vanished and they are left with un-supported products.
So the key to us is that we only work with partners who can demonstrate that their products and services are right for the proposition.
SbS: How can I work out what type of financial product is best suited to solar and what are the pros and cons of some other others?
CCEF: How’s this for a wacky idea; ask your customers! It is bizarre how many people I talk to who are assuming that a PPA or longer term lease is the only solution for Australia. What we know is that Aussies are currently favoring a discussion where they own their solar system and get all the benefits once it is paid off via a loan. Evidence out of the US suggests that the market is heading that way as well; non-ownership PPA type models are decreasing and being replaced by simple leasing or loan to own.
We are still not convinced that the PPA model is right for the Australian consumer or small business owner who may have a ownership thought process. We will be trialing some PPA pilots and are looking forward to finding out how popular they really are or for what situations they are ideally suited.
We led with an ownership finance product because its clear that the customer has title to the asset and once the finance is paid off…that’s it…all benefits reside with them
SbS: OK, so I choose a product that suits. Do you just sign me up and then I’m away?
CCEF: I wish it was that easy. It is simple to become an approved partner if you are selling solar in to the commercial world. However, for the world of consumer finance in Australia it is a tricky and risky landscape for financiers. This is because financiers and their solar partners are considered to be “Linked Service Providers” under the National Consumer Protection Act. This means that the financier can legally be deemed the supplier and thus, if an installer does not fulfill their obligations the financier could be responsible for these obligations.
So warranty claims, complaints, any legal action tied to installations, etc. can become the responsibility of the financier (which is one of the reasons that the Banks have been slow to enter the market). Now as a financier, we are comfortable taking the credit risk because that’s our business however, taking the asset risk is not part of the equation. Instead, we carry out significant due diligence on our installer partners to get comfortable that they do the right thing, will be around to service their customer and only provide panels and inverters that are top notch.
SbS: Why do you have such a high bar for solar companies to access solar finance products?
CCEF: At CCEF we take accreditation extremely seriously, we need to be as sure as we can be that our approved vendors are selling reliable assets ethically and will be around to service any warranty issues; we probably turn away more partners than some other finance companies.
Our products and service are built on trust, so we have a rigorous but super-efficient accreditation process and a smooth mechanism for approving transactions.
All deals are input by the homeowner into our online application portal allowing solar consultants to close a deal in the home; our specialty is super-fast approvals because we know that helps win more sales and reduce loss rates. This portal has our rules and credit requirements embedded in the questions and workflow, allowing a rapid online approval or decision to be given. For solar companies, closed deals are then paid in full on installation. We then take the credit risk and manage the ongoing payments, defaults and risk under the NCCP. So we want to work with vendors who will do the right thing by us and their customers. We asked the market what they wanted and believe we have delivered; our partners are using the system with great results.
In simple terms, if you have great products, a long term business view and can prove your commitment to quality, then your solar company is a perfect fit to our finance solutions. This adds huge value for consumers and solar businesses.
SbS: OK, so I get approved, have the right product mix and now I’m ready to start selling – but I haven’t really sold financed products before. Are there any traps I should know about?
CCEF: Yes there are.
Firstly, do not think it will be the panacea to your decreasing sales volumes or margins. Finance is not a bolt on product ….or off the shelf notion that just results in more sales. It needs to be understood and woven in to your sales process carefully and cleverly.
Secondly, most solar companies do not have an ACL (Australian Credit License), and why would they? There are a few that do and these are the forward thinkers who have forecasted the need to embed finance as part of their sales operations. The majority of our partners operate as a Non ACL holding referrer and they are not actually allowed by law to behave as if they are the finance company. They are not allowed to ‘provide any form of credit assistance’. This means that they need to refer the opportunities to us or the website and can actually give only limited information about the product.
We understand the rules and have processes in place to enable a very smooth application process even if the partner is not an ACL holder. These processes vary depending on how a vendor generates leads and closes sales. We clearly communicate and train each sales rep on what they can do and say at point of sale. It is actually quite a tricky legal landscape that needs to be understood and mapped out according to how the vendor goes to market.
That’s also a specialty of ours.
SbS: What kind of solar finance sales techniques work best?
CCEF:Any technique where the customer is delivered long term value.
Any technique that gives you license to talk to your customer post install and for years ahead.
Any technique where you’re not selling and running.
Any technique where the primary selling point is not the cash price.
Any technique where you are selling at sustainable margins and growing your business.
So this may sound bloody obvious but it is easier said than done. We‘ll be at Clean Energy Week this year demonstrating how it works and would love solar companies to drop by and meet the team.
Now clearly, I’m helping CCEF to get the word out about what they have to offer and they have managed to great some big plugs in for their products and services.
But here’s the drum; the secret art of successful solar finance is that it can be complex, time consuming and involves a different way of thinking about business and risk. Finance won’t suit every sale and different products and services are needed for different companies and markets.
However, if you get it right then you can maintain margins, increase conversion rates and build a book of loyal clients who will be open to upgrades and new equipment for years to come.
So you have a choice; work all that out for your-self or, find a good company that can help you.
Photo Credit: Solar Finance/shutterstock