Plumbing services are something everyone needs at some time, which makes running a plumbing business very lucrative—provided you have the working capital you need to take advantage of opportunities that come your way. If you don’t have the financing necessary to take on new clients, purchase equipment, or move into a new service area, then you may miss out on the opportunity to grow your business.
At Select Funding, we work with plumbing businesses every day to provide them with the financial support they need to achieve their most important business goals. If you’re experiencing cash flow issues, the good news is that there are multiple financing options available to help you. Here are six you should know about.
What is the First Step to Running a Successful Plumbing Business?
The first step to running a successful plumbing business isn’t related to your plumbing skills and know-how. Instead, it’s all about the practical requirements. We’re talking about the need to have the working capital necessary to buy equipment, pay employees and contractors, and market your business to the people who need and are willing to pay for your services.
Your working capital is the difference between your current assets and your current liabilities. That means you can calculate how much working capital you have by totaling your current assets and current liabilities, and then subtracting your liabilities from your assets.
The issue for many small plumbing businesses is that they don’t have enough working capital on hand to pay for their regular operating expenses, including things like payroll, liability insurance, or plumbing software. They need to find a source of financing that can provide them with the money they need to pursue business growth while still being affordable.
6 Financing Options for Small Plumbing Businesses
Now that you know why working capital is so important, here are six financing options that you may want to consider for your small plumbing business.
#1: Unsecured Loan
Unsecured loans are loans that provide money to small businesses without requiring collateral to secure them. With an unsecured loan, the lender takes on more risk than they would with a secured loan. As a result, unsecured loans often have strict underwriting requirements and may come with high interest rates, too.
It’s possible to get unsecured loans from some traditional lenders, including banks and credit unions. If your personal and business credit scores aren’t high enough, you may have difficulty meeting the underwriting requirements for an unsecured loan.
#2: Secured Loan
Secured loans are the opposite of unsecured loans in that they require that the person applying for the loan provide collateral to protect the lender. If the borrower defaults on the loan and has provided collateral, the lender may seize the collateral to repay the loan. It’s not uncommon for small business owners to put up their personal homes or other assets as collateral for a secured loan.
The underwriting requirements for secured loans are not as strict as for unsecured loans because the lender has some protection. However, the risk of losing whatever you put up as collateral is real, so many small plumbing business owners prefer to find other ways of getting the working capital they need.
#3: Small Business Financing
Small business financing allows small plumbing business owners to get the working capital they need without going to a bank or having to meet strict underwriting requirements. That’s because the approval process is simple and uses the company’s business receipts as a way of evaluating its ability to repay any financing.
For example, Select Funding provides small business financing to small plumbing businesses in amounts up to $250,000. We have only three basic requirements related to your business, your credit score, and your monthly business receipts. We’ll get into more detail about those later.
You can use small business financing to pay for everyday expenses such as rent, utilities and payroll. You can also use it to pay for a marketing strategy to build your customer base and achieve your business growth goals.
#4: Business Line of Credit
In addition to providing loans, many banks and credit unions also provide small business lines of credits, which are a form of revolving credit. By that we mean that anybody who has a line of credit can borrow funds, repay them, and borrow them again. In that way, lines of credit are similar to business credit cards.
Many lines of credit are not secured, but some lenders require the business owner to sign a personal guarantee. That means that if you default on your payments, you would be personally liable to repay any money you borrowed. The underwriting requirements for LOCs are often strict. There is typically a withdrawal period of one to two years after which there would be a repayment period where you couldn’t withdraw any funds.
#5: SBA Loans
The United States Small Business Administration, or SBA, provides both secured and unsecured loans to qualifying businesses. You’re most likely to need collateral if you need to borrow a large amount of money.
SBA loans may be approved quickly but it may sometimes take up to a month to get your money. That’s one major difference between SBA loans and small business financing, which can provide funds in as little as 24 hours after approval.
#6: Equipment Financing
Equipment financing is a specialized form of small business financing that provides small businesses with the funds necessary to purchase necessary business equipment. For a small plumbing business, necessary equipment might include all of the following things:
- Office furniture
- Office machines, including computers, tablets, printers, scanners, and more
- Plumbing tools and supplies
- Plumbing software
- Company trucks and other vehicles
Select Funding provides equipment financing in amounts up to one million dollars to qualifying businesses. You can use the funds to purchase any type of equipment you need to turn your plumbing business into a success.
How Does Small Business Financing for Plumbing Businesses Work?
The process of obtaining small business financing with Select Funding is simple. We have only three requirements, as follows:
- You must own your own business for at least a year
- You must have a minimum of $100,000 in annual sales
- You must have a personal FICO score of at least 625
When you apply, we’ll ask you to provide six months’ worth of business bank statements, which we’ll use to verify your annual sales. We’ll use our automated system to review your application and streamline the verification process.
Once you’ve been approved, you may receive your funds in as little as 24 hours, far less time than it would take to obtain financing through a bank or credit union.
How Does Equipment Financing for Plumbing Businesses Work?
The process for equipment financing with Select Funding is the same as it is for small business financing. You’ll need to meet the same requirements, with $100,000 in annual sales and a FICO score of 625 or higher.
Approval happens quickly and as is the case with small business financing, you may receive your funds in as little as 24 hours after you’ve been approved. The primary difference between small business financing and equipment financing is how you may use the money. Here are a few examples of ways that our plumbing business clients have used their equipment financing:
- Upgrade tools and equipment to provide better services and take on more clients
- Buy or upgrade your plumbing software
- Buy plumbing trucks and vans for your workers to use
- Pay for new computers and tablets for your employees
- Redesign your office with new furniture
We can provide up to $1 million in equipment financing to qualifying plumbing businesses, meaning that you can get enough money to pay for all necessary equipment and upgrades to achieve your business goals.
How Can Financing Help You Achieve Your Small Plumbing Business Goals?
Getting the financing you need can help you turn your business goals into realities. Here are a few examples of what you can do if you have sufficient cash flow:
- Hire a small business marketing agency to help you create a marketing strategy for your business.
- Upgrade your plumbing tools and equipment to provide state-of-the-art services.
- Expand into a new service area to attract new clients.
- Pay for certifications and continuing education for your employees.
- Purchase vehicles to use in your plumbing business.
- Pay for plumbing software to make it easy to manage your business.
- Pay for plumbing insurance, workers comp, and liability insurance.
Growing a business requires real dedication and effort, but no amount of effort can overcome a lack of financing. With simple requirements and speedy approvals, Select Funding can provide you with the working capital you need to achieve your business growth objectives.
Get Working Capital to Grow Your Small Plumbing Business
A lack of working capital can leave your plumbing business stalled and struggling to grow. Understanding which financing options are available to you—and which are most readily accessible—is the first step toward obtaining the funding you need.
Do you need working capital to fund your plumbing business growth goals? Select Funding is here to help! Click here to read about our funding for plumbing companies and begin the application process.
