Fortiva has built its business by giving a second look to consumers who otherwise would not be eligible for credit. The result has been a burgeoning business in the “second-look” credit market which has helped fuel strong growth in the flooring segment.
Michael Fredricks, senior vice president of business development at Fortiva Retail Credit, noted that Fortiva’s second-look credit position has a unique and floor covering-oriented backstory. He had previously been a top executive at Empire Today, tasked with reducing turnover in the sales team. He discovered that one hurdle was consumer credit — with fewer approvals, there were fewer sales and hence, sales people made less commissions.
“One of the projects we landed on was how can we get more clients approved so sales representatives made more money,” he recalled. “This was one of my goals.” He looked at several second look credit companies but “Fortiva won across all categories,” from technology to integration.
Once Empire shifted 90 percent of the second look business to Fortiva, the company saw more than $1 million in additional revenue in one month. Fredericks said by partnering with Fortiva, the company was able to pick up an additional 50 percent of business and retention improved by 27 percent.
Since joining Fortiva, Fredricks has worked on building the company’s retail business. He noted that even eight years after the recession, 50 percent of the U.S. population does not qualify for prime credit, particularly as the credit market faces more regulation. With second look credit, more consumers have options to complete their purchases; Fortiva’s customers’ average credit store is 610.
By offering second look options, it enables the flooring store to get an additional 25 percent to 50 percent more customers approved. “It makes the customer happy and as an end result, the flooring company gets the sale, the representative gets commission and it increases customer satisfaction. The ancillary benefits are tremendous.” Fortiva approves 25 to 50 percent of what primary financing companies turn town, meaning one in three customers get approved.
Technology has streamlined the entire financing process as Fortiva operates with both primary lender information or on its own — depending on how it’s structured. If the retailer and primary lender have the necessary systems in place and a consumer is turned down for primary financing, the data is automatically transmitted to Fortiva for other financing options.
“Within 10 seconds of being declined by a primary lender, we can approve them without them even knowing about it,” Fredricks said. If the primary financing supplier doesn’t want to integrate, though, the sales person has to have a conversation with the consumer about pursuing additional options. Fredricks said this model is particularly beneficial to flooring retailers.
While Empire remains the company’s largest flooring partner, it also works with manufacturers and distributor networks for retail financing. Since the average flooring sale is $2,500 to $3,000, it’s ideal for financing a home improvement project. “Even with a higher interest rate, it fits in most people’s budget. The ticket size is manageable,” Fredericks added.