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Ally Financial, one of the 25 biggest finance companies in the United States, has entered the home services market. The Detroit-based creditor announced a partnership between Authority Brands, one of the largest home services franchisor, and its Ally Lending subsidiary.

Ally started out as the finance arm of General Motors. It grew out into a major mortgage lender before being sold to a private equity firm and then turned into a bank holding company during the financial crisis.

Ally Financial’s Ally Lending subsidiary.

BIG SPLASH: Ally Financial’s Ally Lending subsidiary moved quickly into the home improvement market by partnering with Authority Brands, parent of One Hour Heating and Cooling.

Today, Ally is a publicly-traded company that has specialized in auto finance and online bank accounts with generous interest rates. In 2016, the company started to expand its financial offerings by getting back into the mortgage business. Lately, it’s been entering the point-of-sale business, offering financing for health care, retail sales, and, now, home improvement.

Ally Lending’s highlights include a no-credit-impact consumer pre-qualification. The application process is paperless, a reflection of Ally’s digital-focused model.

Authority Brands includes more than 1,000 franchisees under eight brands, including One Hour Heating and Air Conditioning. Authority was in need of a new finance source after one company it worked with exited the market. It happened that several of those executives joined Ally and they contacted Authority’s management about this new opportunity.


Offering Financing Is Crucial in Today’s Market

One of those executives was Greg Cicatelli, who now serves as head of enterprise home improvement sales at Ally Lending. Cicatelli said teaming up with Authority provided a national footprint for Ally Lending right away.

“It’s been an exciting partnership and really, really strategic for us,” he said. “The brands definitely pair up with each other very well.”

Mark Dawson, One Hour Heating and Air Conditioning’s chief operating officer, said bringing Authority Brand’s large group of franchisees to the table streamlined the roll out for Ally Lending. So far, more than 250 Authority Brands franchisees have signed up. For Authority Brands, financing has become essential to the sales process.

“Offering financing to your customers today is a critical component that you have to have,” Dawson said. “If you’re not able to offer that, you’re not even in the game.”

Offering financing also allows One Hour Heating and Air Conditioning franchisees to offer more easily the types of high-end HVAC products consumers have been shopping for in the past six months. Another advantage of adding Ally as a lender is the company’s high profile.

“Any time you can partner with a brand name, it’s important,” he said. “Most people are more at ease selecting names they are familiar with.”

This helps attract potential franchisees as well as potential customers. Being able to offer something special, such as a national finance source, helps when selling a brand to a franchisee, Dawson said. This has long been true for Ally in the auto finance space.


Helping Contractors by Helping Consumers

This experience in auto finance gives Ally some useful perspective when entering the home improvement space, said Hans Zandhuis, president of Ally Lending. In both fields, Ally serves a very diversified market. Zandhuis said the company knows how to manage relationships with small and mid-sized businesses. Ally management also understand the special needs of business-to-business-to-consumer financing.

“We walk into our business partners and say, ‘How do we help you continue to grow while always doing right for the consumer?’” Zandhuis said.

In all its business lines, he said, Ally aims to avoid overleveraging consumers. The company could approve every customer by charging a much higher interest rate, Zandhuis said. But there would be little long-term benefit. Contractors want recurring business and they lose that if consumers feel unhappy with a financing arrangement. Also, both financing and home improvement face constant regulatory scrutiny, Zandhuis said.


Ally Enters Field with Large Balance Sheet

Ally Lending is able to finance many customers because the parent company has a large balance sheet. The company’s goal is to be a leading finance source in all its markets, Zandhuis said.

“I really believe there’s a real gap in the space in terms of large balance sheet, technology-oriented companies that are committed to financing home improvement,” he said.

Zandhuis said Ally has entered the market at the perfect time. Interest rates remain low for the foreseeable future and consumers are investing in their homes. Also, consumers are moving away from credit cards of major purchases and now want specific financing for expenses such as a new HVAC system, he said.

The one obstacle has been the lack of events due to the coronavirus pandemic. Usually the fall would be filled with conferences and Ally Lending would make its debut at these. The upside of this is plenty of HVAC contractors are in their offices, making it a good time to contact people directly. Cicatelli said he is making a lot of phone calls and getting a really good response.

Dawson said he is glad to see another finance company enter the home services market, especially one of Ally’s size. He said more competition keeps everyone sharp.