Implementing In-House Financing

Jan. 1, 2015
Jerry Greeff used an in-house customer financing program to build a profitable, $3.5 million a year shop in one of Baltimore’s poorest neighborhoods

On his payroll, Jerry Greeff has two retired Baltimore police officers. One is at his shop every day, armed. 

“It’s just that kind of neighborhood,” he says. “It’s a dangerous area—obviously better in the day than at night, but we don’t take anything for granted.”

Seeing that type of security at a business in East Baltimore is not uncommon, Greeff says.

Finding a business like One Stop Auto, Greef’s full-service repair shop, is, though.

Despite operating in one of the city’s poorest and most crime-riddled sections, Greeff has built a $3.5 million business—one that’s been profitable nearly every year in operation, one that has an average repair order north of $700.

Again, he did this in a market chock-full of the demographics that make most shop owners cringe: East Baltimore had a median income of $29,263 in 2011, according to; the median rent was $517; 28 percent of all households are led by a single mother; nearly 45 percent of the population does not have a high school degree.

So, the question is, how do you generate revenue in an area where many customers don’t have the means to pay?

“That’s the question, right?” Greeff says. “You have to be a little creative.”

The Backstory

Greeff, 62, has worked in the automotive aftermarket his whole career—but he’s never worked on vehicles. 

He bought his first gas station at 25. It had a four-bay shop attached, so he hired a tech and started offering repairs. Eventually, he outgrew that and moved into a 10-bay shop. He moved across town (from West Baltimore to East) in 1991, and has been in the same 14,000-square-foot facility ever since.

“It’s the only job I’ve ever really had,” he says, “but it’s interesting because I’ve never turned a wrench. I think that’s what’s really helped me my whole career—I don’t get caught up in the shop; I’m not worrying about diagnosing vehicles or fixing a transmission. I’ve always been focused on the front counter, on marketing, on our accounting, and on how we’re going to grow.”

The Problem

East Baltimore’s demographic issues, as it pertains to building a profitable business in the area, are clear-cut. But they did provide a clear advantage, as well.

“It’s sort of a curse and a positive,” Greeff explains. “There’s that degree of danger in the area and it makes things more difficult at times. But I also have very little competition in my area. There’s no density of auto repair shops that would come into this area.”

With a population of roughly 50,000 in East Baltimore, Greeff had the opportunity for market share. But that still wouldn’t guarantee a profitable business. 

Greeff is astute on building tickets on jobs—he focuses on inspections, works on finding all issues with a vehicle and presenting it to the customer in an informational way. Relationship selling is one of his strong suits. 

Still, he says, if you think upselling a job is difficult in a suburban market, imagine East Baltimore.

“No matter what else we do, if we can’t get people to purchase the work we find, we’re not going to make any money,” he says. “It’s that simple.”

The Plan

Working in a “different” market has helped Greef look for solutions in very “different” places, he says. And to build his business, he turned to another concept that most shops steer clear of: in-house financing. 

It can be a risky proposition, he says, and can require an entirely new level of involvement to manage it. But, over the last several years, Greeff has honed in on a very specific process, one that he devises with the help of his attorney.

Here’s how it breaks down:

The Jobs. Greeff only provides financing to customers on large-ticket jobs. Lower tickets, he says, are easy for customers to skip out on. And he doesn’t want to give the impression that customers don’t need to pay upfront for basic work. His usual threshold is a $500 ticket, but, as he’s the one who manages the program, he uses his discretion with certain customers. 

The Customer Requirements. There are two main components to qualifying: The customer must have a full-time job (at least 35 hours per week), making at least $13 per hour; and the customer must put up the title of the vehicle for the shop to put the lean on. If a customer meets those two factors, that qualifies them, without a credit check, for up to $500 of the repair bill to be financed. Higher amounts require a credit and background check.

The Alternate Option. If a customer doesn’t meet Greeff’s requirements, he refers them to a local lending agency, First Mariner, that offers lenient requirements for lending.

The Payment Plan. At least 40 percent of the total ticket must be paid up front, and Greeff prefers closer to 50 percent. The shop finances the rest with a 21 percent interest rate, spreading it out over either five or six monthly payments that total 20 percent of the amount financed. The shop also charges customers for the lean fee on the title ($20 in Maryland).

The Contract. Greeff has each customer sign a Retail Sales Contract outlining each of the items detailed above and acting as a legally binding agreement between the customer and the shop.

The Collection Policy. In-house, Greeff doesn’t allow payments to go late without notifying the customer first. He personally calls them if a due date arrives and he hasn’t received payment. As is outlined in the contract, he waits only a handful of days on delinquent payments before filing suit.

The Results

Greeff says that, on average, roughly 40 percent of his customer base is using the financing program at any given time—roughly 800 people.

It causes a number of challenges, mainly for Greeff and his wife, who works as his bookkeeper. Cash flow is the biggest issue, he says, as the shop is floating large amounts of its sales throughout the year.

“It’s difficult because each of those sales—those dollars are taxable, but we don’t have that money in cash,” he says. “You have to be frugal, and really pay attention to cash flow to make this work.”

One thing that helps, he says, is his menu-style pricing: He gives straight, one-number prices for most work in his shop (e.g., he charges $1,699 for each transmission rebuild). It allows him to track dollars and sales much easier.

He says that the shop’s high interest rate helps in leveling out cash flow, noting it takes roughly 80 percent of the total interest fees in a given year to cover the amount of sales his shop floats. Although not wanting to give an exact number, Greeff says the shop turns a healthy, double-digit net profit and usually has a neutral cash flow on its $3.5 million in sales.

“It makes all the difference. It really, really helps,” he says of the payment plan. “We do a lot of big jobs, engine and transmission work. The financing brings in a lot of extra work. It keeps our techs busy, and keeps us profitable. And, if you’re doing this, you don’t have to worry about undercutting prices—you’re never discounting when you’re providing financing.”

Greeff says that roughly 10 percent of financed repairs have issues with late payments, and only a fraction of that results in legal action. 

The Takeaway

Not every shop can—or should—provide in-house financing, Greeff says. He feels he’s created a good consistent model that allows his shop to succeed, but each shop needs to take into account its own market.

“We’re in a unique position, and this is what I needed to do to build the business in the way I have,” he says. “But every shop should look at what would help them most. Every market is different. Some are more challenging than others, but that doesn’t mean you can’t succeed in them. I mean, we have to have armed, retired police officers guard our shop. This isn’t the best neighborhood, but that doesn’t mean you can’t build a strong business. You just have to find the solution that fits best.” 

About the Author

Bryce Evans

Bryce Evans is the vice president of content at 10 Missions Media, overseeing an award-winning team that produces FenderBender, Ratchet+Wrench and NOLN.

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