Business owners like plumbers and HVAC specialists have a unique set of business needs, and sometimes there isn’t enough cash on hand to cover those business expenses.
Equipment in the plumbing and HVAC industries doesn’t come cheap, and if you have to wait until your client pays you to cover the expense, your company will suffer. That’s where business funding comes in handy: taking out a loan or line of credit can ensure you have the working capital you need to keep your business running smoothly.
How a Plumbing and HVAC Business Loan Can Help Your Business
Your plumbing or HVAC business needs steady cash flow, but when projects come in fits and spurts, or you have to wait a few weeks to get paid for a job, that can put a strain on your finances.
Small business loans can ensure you’ve always got capital to cover business expenses like paying your HVAC contractors, buying supplies, or investing in equipment you need to do your job. And during slow seasons, having access to capital ensures you can pay your bills on time.
Types of Financing for Plumbing and HVAC Businesses
Plumbing and HVAC companies have a wide range of financing options, so there’s sure to be one to suit your needs.
Working Capital Loans
Banks and credit unions offer long-term financing at good rates, though you may find it more difficult to qualify for them than other options. If you already have a longstanding business relationship with your bank, that could be a good place to start, however, shop around, because you might find a better rate elsewhere.
The Small Business Administration’s 7(a) loan program is a popular choice for small business owners because of its low rates and long repayment period. You can use SBA loans to purchase real estate and equipment, as well as to use for working capital.
Line of Credit
If you don’t need a lump sum of cash all at once, consider a business line of credit. You are approved for a set amount, and you can borrow up to that amount at any time. Once you repay it, you can borrow it again, unlike with a loan, which, once paid back, is done.
If you’re specifically looking for capital to purchase plumbing or HVAC equipment like an air conditioning unit, equipment loans are a good fit. Because the equipment you’re buying serves as your collateral, you can typically get good rates on these loans.
Business credit cards are another financing option for your business, but keep in mind that most have high interest rates. Pay your balance in full each month, and you won’t incur these charges.
If your business has bad credit and can’t qualify for the above options, consider short-term loans. These lenders consider factors besides your business and personal credit scores, though these loans do have high interest.
Merchant Cash Advance
While it’s not actually a loan, a merchant cash advance can also get you the funds you seek. You are advanced an amount based on your average credit card sales and repay this amount each day or week from your transactions.
How to Qualify for a Plumbing and HVAC Business Loan
There are many factors that lenders use to determine your eligibility for business loans.
Your business or personal credit scores may be considered. These scores indicate to a potential lender how much risk you present in terms of the likelihood of paying back the loan. The lower your credit scores, the higher the risk you may project.
While there are lenders who will lend to you if you have fair or bad credit, or if your business credit is nonexistent, learn how to establish business credit so you can qualify for better rates in the future.
Lenders may also look at how long you have been in business. Most startups struggle to find lenders because they may be seen as more volatile, given their lack of experience in business. If you’ve been in business for two years or more, you may qualify for more financing options.
You may also be required to make a certain annual revenue to qualify. Again, this is because the lender wants to ensure you will be able to pay back the loan easily.
How to Apply for a Plumbing and HVAC Business Loan
Loan applications may vary from one lender to another, but there are a few aspects of the HVAC business financing application process that are consistent.
Some online lenders have very short applications that take just minutes to complete, and you’ll receive a decision automatically. If you apply through a traditional bank, you may be required to visit a local branch and apply with a banker. In that case, it may be several days or weeks before you have a decision.
As the borrower, you’ll be asked to provide information about both your business (address, location, time in operation) and yourself (name, address, Social Security number).
You may be asked to provide bank statements to prove your annual revenue or other financial statements. You’ll also be asked for the loan amount you are requesting.
Once you have submitted your application, you will receive a decision (the time frame will depend on the company). If approved, you will be presented with your loan options, interest rate, and loan terms. Sign your loan agreement and your funds will be deposited into your business bank account within a few business days.
Your monthly payments will begin a few weeks after you receive your funds, and you may have the option to make automated payments, which is convenient and keeps you from forgetting and missing a payment.
Choosing the Right Loan for Your Plumbing or HVAC Business
With so many funding options, which is right for you? There’s no single answer; it will depend on your HVAC or plumbing business’s specific needs.
Be sure to shop around to ensure you get the best loan options and interest rates possible. Typically, you can see if you prequalify with a lender without it impacting your credit. Also read through the repayment terms so that you understand what implications there may be if you miss a payment or are late in paying.
This article was originally written on April 22, 2021.