It’s not surprising then that, like many businesses, HVAC businesses need help with financing. Thankfully, there are a number of loan options to allow HVAC businesses to acquire the funding they may need to remain a contender in this competitive industry.
What are the reasons for applying for HVAC business loans?
There are many reasons why an HVAC business may wish to look for financing. These reasons include:
- working capital
- business expansion
- purchasing of equipment
- covering payroll
- hire new employees
- licensing and business fees
- liability and workers’ comp insurance
- emergency funds
- covering costs of OSHA regulation
- meeting safety requirements
- advertising and marketing
- additional specialist training that’s necessary or can put you ahead of the competition
What are the benefits of HVAC business loans?
There are a number of benefits to getting an HVAC business loan, especially in such a competitive industry. In order to stay on top, HVAC companies need to be able to offer the best, most up to date products which can often be very expensive both to buy and any extra training that is needed to know all of the ins and outs.
In general, HVAC business financing allows you to stay in the game when you are having cash flow problems or allows you to expand when you are seeing high levels of success. In particular, funding from HVAC financing companies allows your business to:
- get up to date with the new efficiency standards – more and more customers are looking to switch to the most efficient models as they have lower environmental impacts and can help them to save money
- upgrade HVAC technologies – you can offer your customers the smartest technology available which will not only help to make their lives easier but will also allow you to keep track of the status of your client’s HVAC systems
- train new and existing employees
- cover other business costs such as rent, utilities, licenses, and insurance
What types of loans are available for HVAC companies?
With many types of loans available for HVAC companies, it is important that you are able to choose the best loan that will be most suitable for your needs and your financial situation.
Short-Term Loans
Short-term loans are the ones to choose is you want money fast, in as little as a few days, although it also means making repayments fast too. Short-term loans, as the name suggests, have loan terms of 12 months or less with repayments made on a weekly or daily basis.
Typically, instead of charging interest as a traditional loan does, a short-term loan lender will charge you what is known as a ‘factor rate’. This is a flat fee that will be a multiple of your loan amount.
Short-term loans are a good option if you are looking to fund working capital, for advertising and marketing, or for emergency funding.
SBA Loans
SBA Loans are most desired by small businesses due to their competitive rates and terms, as well as the fact that the Small Business Administration guarantees up to 85% of the loan amount so you are more likely to get approved by lenders. However, because of this desirability and government guarantee, SBA loan requirements are often hard to meet so you are lucky if you are able to qualify.
The SBA 7(a) loan is the type that is most commonly applied for by HVAC companies for business expansion, equipment purchasing, debt refinancing, working capital, and buyouts. This type of SBA loan can provide working capital/equipment loans with terms of 10 years, or commercial real estate loans with terms of 25 years.
Equipment Financing
If you are simply looking to fund the purchasing of equipment, you should consider equipment financing. Like a traditional loan, you will be required to make monthly payments, plus interest, to an Equipment Financing Company until you have paid back the cost of the equipment. Generally, you will have to cover 10-20% of the equipment cost, and the lender will cover the rest, although on occasion they will cover the total cost.
One of the benefits of equipment financing is that the equipment itself acts as collateral. That means that if you default on repayments, the equipment is seized by the Equipment Financing Company and liquidized to that they can get their money back.
This means that, since equipment financing is a secured loan, they typically offer better terms and interest rates than other options.
Business Lines of Credit
A business line of credit works in a similar way to a business credit card in that you are given a credit line, with a limit, that you can use whenever you need to. However, unlike a credit card, you are only required to pay interest on the amount you actually use, and, once you have paid the funds back, you can use that same money again and again throughout the term of the line of credit. This is a good option for covering payroll or daily expenses.
How long does it take to get an HVAC business loan?
The length of time it will take to secure an HVAC business loan will depend on which type of loan you are looking to acquire. Alternative financing, such as lines of credit, can take as little as a week to supply you with funding, whereas other financing options, such as SBA loans can take anywhere from 10 days to 1 month to supply you with funding after your application has been approved.
What are the rates for an HVAC business loan?
HVAC business loan rates range from around 5% up to 25% depending on the type of financing you choose. SBA loans will offer the best rates, but they will be hard to obtain, on the other hand, loans with higher rates, like term loans, may allow you to qualify even if you have less than desirable credit.
Will my credit be affected when applying for an HVAC business loan?
No. Your credit score will not be affected when applying for any HVAC business loan. Only when you have been approved for a loan and have made a deal with a lender will your credit score start to be affected.
How do you qualify for an HVAC business loan?
The requirements you need to meet in order to qualify for an HVAC business loan varies depending on both the type of financing you choose and the lender. This includes the amount of time you have been in business, your personal credit score, and your annual revenue.
This is why it is important that you consider all of your options carefully and don’t waste time applying for loans you will be unable to qualify for.
How do I apply for HVAC business loans?
Application processes will vary depending on the lender. You will typically be able to apply online by filling out a form, the length of which is likely to vary depending on the requirements of the lender.
What do you need to apply for an HVAC business loan?
The number of documents you will need to obtain in order to apply for an HVAC business loan will also depend on the lender, although they will all require basic information including your social security number, and your federal tax identification number. Typical documents that are also required by HVAC financing companies include:
- a solid business plan
- credit reports (both personal and business)
- bank statements (both personal and business)
- profit and loss statements
- tax returns
- income statements
- copies of business licenses
- balance sheets
What to consider when choosing a lender for an HVAC business loan?
When you are choosing a lender for an HVAC business loan, you need to consider the following things:
- the purpose of your financing needs – some specialist loans will be a better choice depending on these needs
- loan amount – make sure you get a loan amount of only what you actually need so you don’t owe more you can afford
- loan term – longer terms may seem desirable but can add up to a higher cost as the interest builds up
- interest rate – this will greatly affect the overall cost so be sure that you will be able to afford the loan with interest added on
- your eligibility – there is no point in wasting time looking at lenders/loans you will be unable to qualify for. In the prequalification stage, they will primarily be looking at time in business, credit score, and average annual revenue
- any extra fees – some lenders may not be clear about added fees unless you ask them outright
- the reputation of the lender – it can be beneficial to check out borrower reviews.
Getting the right HVAC business financing is a great way to grow your business and keep up with the ever-changing heating, ventilation, and air conditioning technologies.
If you are looking for an HVAC business loan, PrimeRates can help you to find the best loan for you and your business. Our application process takes just minutes and it won’t make any difference to your credit score. We will then present you with the best offers from reputable lenders so that you can easily compare interest rates, loan amounts, and terms. Whatever financing your HVAC company needs, click here to get started with PrimeRates.
