Best Roofing Contractor Financing | SMB Compass
Ezra Cabrera | June 13, 2019
Are you a skilled tradesman who wants to start a roofing company? Do you also have great marketing ideas in place and are ready to hit the ground running but there’s just one thing holding you back? You lack the needed working capital to get your business off the ground. Fortunately, there are numerous roofing contractor loans available to help you fund your new business venture. Here are four of the most popular funding sources for roofing contractors.
1. Equipment Financing
In the roofing business, having the proper equipment is essential. Without it, you wouldn’t be able to kick start your company. Oftentimes, the high-quality equipment needed comes at a hefty price leaving most business owners in a position where they cannot afford the out-of-pocket expense. But once again, Equipment financing is a great solution for meeting your equipment needs.
You don’t have to pledge any business or personal assets because the equipment purchased acts as collateral for the loan. This means that lenders can take on more risk and offer lower interest rates. You can also repay the loan as you generate revenue from your business, and use the depreciation of the equipment as a tax benefit over a period of time.
2. Roofing Business Cash Advance
If you find yourself in a cash flow pinch and in need of money ASAP, a merchant cash advance is an ideal solution. With this type of financing, you can sell your future revenue in exchange for instant cash. A roofing business cash advance is technically not a business loan. But rather it’s a cash advance against your company’s future receivables. With a cash advance, the funding company hands you a percentage of your total receivables.
3. Business Line of Credit
It’s a fact businesses need quick access to cash to cover their daily expenses. A business line of credit makes cash available to you whenever you need it. To improve your chances for approval, it’s best to apply for a line of credit before you even need the money.
This type of financing is somewhat similar to a credit card. You can withdraw money from your predetermined credit limit, and you only have to pay for the money you’ve used plus interest. Once you pay back the money, you can draw from your account again, given that you don’t exceed the credit limit. Many business owners prefer a business line of credit since you don’t need collateral, it’s revolving, and readily available when the need arises.
4. SBA Loans
If you’re looking to get bank rate financing for your small roofing business, SBA loans are your best option. It’s difficult for small businesses to secure a bank loan, which is why the Small Business Administration (SBA) created loans to specifically support and encourage small business owners to secure conventional business loans. The SBA offers incentives to lenders in order to provide financing for small business owners by covering (up to 85%) of the loan, thereby virtually eliminating risk for the lender.
5. Business Term Loans
A business term loan is the first thing that comes to mind when you think of business loans. Once qualified, lenders will give you a lump sum of money and you can repay the loan within a specified period of time. Repayment terms usually vary between a few months to a few years. The average interest rates for business term loans vary between 7% and 30%. If you’re a strong borrower, you can qualify for more favorable loan rates and terms. You can use the funds from the loan for almost any business purpose and you don’t have to secure it with collateral. The value of the loan depends on your business’ credit rating, your revenue, and overall financial health.
6. Invoice Factoring
Invoice factoring is the process of selling your outstanding invoices at a discount in exchange for immediate working capital. Lenders often give you 60% to 90% of the total value of your invoices upfront. They are also in charge of collecting invoice payments from your customers. This means that your customers will pay their dues directly to the lender you’re working with rather than to you. Once the lending company receives your customers’ payments, they’ll send you your remaining balance, minus transaction fees. However, some companies may advance you the entire amount and then charge a weekly fee as you repay the loan.
Roofing Contractor Loans for Your Business
Just like all business owners, roofing contractors need a steady flow of cash to maintain business operations. If you don’t have enough working capital, your business will suffer in the long run. If you want to know all of the details regarding roofing contractor loans for your business, getting in touch with a financial expert is a must. They can walk you through your options and help evaluate your business to determine which loan works best for you.