Best Business Loans for Gutter Companies
Do you own a gutter company? Have you been thinking of starting one? American homeowners have been investing in their homes like never before – spending on home improvements and repairs increased 3% during the pandemic to $420 billion.
Gutter companies are a smaller piece of this pie, and yet still have opportunities to grow and expand. The U.S. gutters and downspouts industry is forecast to expand an average of 2.0% annually to $5.4 billion in 2025, with residential growing more than commercial.
The global market for rainwater gutters has seen a compound annual growth rate of 2.5% as eco-conscious consumers and people who live in areas with low annual rainfall seek to harvest rainwater. Adding this option to your business could expand your target market and opportunities.
Alternatively, gutter protection and gutter guards have exploded in demand – as much as 5.8% yearly – and yet in some states with 300 gutter contractors, less than 10 offered this service. Investing in, learning about, and offering gutter protection to your clients could greatly increase your business’ revenues.
If it’s time to grow, or if you just need access to capital to maintain operations, borrowing can support your business.
Questions to Ask Before Applying for a Business Loan for a Gutter Company
Before applying for a loan, answering these questions will help small business owners identify the best lender and loan product. When you borrow, the risk of default could harm your business’ ongoing operations, so it’s important to take the time to ensure success.
Why do you need the money?
There are different reasons to take out a loan: to expand, to purchase inventory, or to meet working capital needs. Get clear on why you’re thinking of borrowing before you approach lenders.
However you plan to use the borrowed capital, borrowing with a clear intent
How much money do you need?
Once you know why you need the money, make a budget for your plan. If you need to cover working capital needs, sum together the rent, payroll and utilities you want the loan to cover. If you’re planning to expand into a new product line, how much will you need to invest in supplies?
When it’s time to apply for a loan, you want to know how much money you’ll need. If you fail to borrow enough, you could trap yourself in a debt cycle of continual borrowing. If you borrowed to fund a larger plan, failing to take out a large enough loan could require loan stacking – taking out multiple forms of credit to fund the plan.
Both falling into a debt cycle and loan stacking could harm your business’ cash flows. Managing multiple loan payments takes time away from running your business, and the amount you pay in interest could make it harder to get out of debt. Have a firm dollar figure in mind that you want to borrow before applying for a loan.
How much can you afford to borrow?
You’ve identified why you need to borrow, and know how much money you need, but can you afford the loan payment on a loan that size?
The size of your loan payment depends on the loan’s repayment term, interest rate, and capital. A loan with a shorter repayment term will have larger payments because you have less time over which to spread the repayment. With a higher interest rate, you’ll pay more to borrow.
When you apply for a loan, lenders will give you an estimated payment amount. You can also use an online calculator and plug in the borrowed capital, interest rate, and repayment term to get a rough idea of your payments. Once you have this information, look at your business’ budget.
Can you afford the loan payment? Do your business’ cash flows cover both the payment and normal expenses? If not, consider scaling back your plans and borrowing less.
Does the repayment schedule work with your gutter company’s cash flows?
Traditional lenders such as banks typically get repaid once monthly with a large, lump-sum payment. This repayment schedule might not work with your business’ cash flows. For example, if your customers pay at the end of the month after a completed gutter installation it would be hard to make a loan payment due on the 15th.
Alternative lenders offer more flexible repayment plans, with daily, weekly, bi-weekly, and monthly payments. The greater customization options allow you to align cash flows with loan payments, making it easier for you to stay on top of your debt obligations.
What is your credit score?
Small business owners with a lower credit score will find it hard to get bank financing. Traditional lenders and banks prefer to work with individuals who have credit scores of 720 and above. They often have other requirements that can be difficult to meet, too, like time in business and profitability.
Before applying for a loan, request a free copy of your credit score. Knowing the numerical value that lenders use to evaluate your creditworthiness will guide you to lenders willing to work with you. For example, alternative lenders offer bad credit business loans and other options for borrowers with poor credit.
If you have a low credit score and high debt balances, expect to pay a higher interest rate. Lenders view your credit score as an expression of risk – the lower your score, the more worried they are that you might default. They compensate for this risk by charging you more money to borrow.
Best Business Loans for Gutter Companies
Once you know why you need the money, how much you want to borrow, what you can afford, and your credit score, you’re ready to identify the best loan product.
Working Capital Loans for Gutter Companies
Working capital is the term that refers to daily operating expenses. It covers payroll, utilities, and rent. Failure to meet these bills won’t hurt larger business plans but rather your ability to keep the doors open.
If you need a working capital loan, you likely need it to fund quickly. It’s two days to payday and a large customer hasn’t paid their invoice, so you’ve just realized that you can’t cover payroll. Working capital lenders know that borrowers often have an emergency need so they fund these loans quickly.
A working capital loan is available to borrowers with credit scores above 650, two months in business, and minimum monthly revenues of $10,000. Lenders extend loans between $10,000 to $1 million, and interest rates range from 9% to 45%.
If you’re experiencing temporary cash flow issues and just need to cover operating expenses, a working capital loan is your best choice.
Bad Credit Business Loan for Gutter Companies
Did pulling your credit report reveal some uncomfortable information? If you’ve paid invoices late, missed payments, or defaulted on a loan in the past you may have a lower score. While you can work to bring it back up, in the meantime you still need access to capital.
A bad credit business lender will extend credit to borrowers with scores as low as 500. You must have minimum monthly revenues of $8,000 to qualify and been in business for two months. Rates range from 12% to 45%, so be sure you’ve budgeted for the payments.
While not the cheapest loan product, a bad credit business loan is often your only option if you have a lower credit score. The good news is that taking out the loan and paying it back will improve your score.
Expansion Business Loan for Gutter Companies
An expansion project – whether it’s opening a new storefront or an advertising blast in a new market – often takes several months to a year to complete. A short-term business loan is ideal for funding projects like these.
Expansion business loans have repayment terms from 12 to 36 months. You’ll want to take out a loan whose term aligns with the project’s expected length. Required qualifications include a credit score above 650, two years in business, and minimum monthly revenues of $10,000.
Lenders will extend credit between $15,000 to $750,000, with rates between 9% to 45%.
Business Line of Credit for Gutter Companies
Do you need to draw on a line of credit repeatedly? If you bill customers half upfront for a job, but underestimated the cost of the gutters, you may need to borrow to order the rest of the supplies. But applying for a loan every time this happened would be time-consuming.
A business line of credit stays open, similar to a credit card, for you to draw upon when needed. Lines of credit often have lower rates than credit cards, though you may pay a fee to keep it open. You’ll only owe payments when you’ve drawn on the line.
If you have a credit score above 650 and have been in business for six months or longer, you can open a business line of credit. Rates range from 5% to 10%, and you can open a line between $5,000 to $250,000. They’re a great loan product to meet ongoing capital needs.
Equipment Financing Loans for Gutter Companies
Is it time to invest in a gutter machine? You could manufacture gutters in-house, reducing the time to complete jobs and improving profit margins. If lags in the supply chain have impacted your business, a gutter machine is a great investment.
But their average cost is $5,500 to $15,000, which is a large amount to fund upfront. Consider taking out an equipment financing loan.
Equipment financing loans are meant to fund the purchase of a specific piece of equipment – you cannot use them for any other purpose. The equipment serves as collateral for the loan, which lowers the lender’s risk. Because of the lower risk, you’ll pay a lower interest rate.
Are you ready to apply for a loan? Reach out to talk to one of our loan specialists today.