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You may be handy with home repair, but taking those skills to the next level by operating a thriving handyman business, requires extra skill and the right tools. Besides marketing, reliability and providing great communication with your clients, financing is one of the most important aspects in helping your handyman services business grow.
But, as a small business owner, you may feel like you are lacking the right resources and you are spending your profits as quickly as they come in. If you need to repair that bank account and you’re ready to explore an online small business loan, there are a few options that will fix your cash flow issues and help you grow your business.
Why a Loan for a Handyman is Often Needed?
Whether you are starting out or trying to grow your customer base and expand services, there are several reasons you may to take advantage of creative funding solutions:
- Starting up your business takes marketing, business cards, insurance, tools and equipment. You need more than repair skills and a smile to create the business of your dreams.
- Your business may require new machinery or vehicles to complete the job. These are high ticket items that many business owners do not typically have the savings for and must finance.
- Working capital to help you get started and keep daily operations going.
- New or added employees to increase your productivity and help you provide fast, quality service to your clients.
According to entrepreneur.com, business owners find greater success and growth by improving their services to better meet customers’ needs. But to do so may take more cash than you have in savings.
While the bank may seem like the most obvious place to go for the money you need, you really need to consider if you will qualify, how much time is required to get your cash, and how much risk you will be taking on.
Understanding the terms and what happens if you go into default should be an important part of your decision making process. Having a flexible repayment schedule that is realistic, based upon the income of your handyman services business, is also a huge factor in selecting the right loan product.
Loan terms can vary greatly from one lender to the next. Here is a basic run down of options and what to expect when you apply:
Banks Loans for Handyman
According to huffingtonpost.com, most small businesses today cannot qualify for traditional bank financing because they lack adequate cash flow or have not been established long enough to produce a lengthy, documented business history. Those business owners are being forced to seek funding outside of the bank. Banks may be willing to consider your loan if you have good credit combined with the collateral, but you could be put through an extensive application process and still be denied.
If you qualify, you still have things to consider:
- Banks require a detailed business plan with your application, which must include a full overview of your handyman business, a list of your competitors, a strategic marketing plan, your tax returns and bank records.
- Underwriters will scrutinize your credit score and credit history.
- Bank loans may demand a personal guarantee or collateral. If you default on the loan you risk your personal credit, finances and property.
- Banks take at least 30 days to process your loan.
- You should consider whether the terms are flexible and if they truly fit your needs.
Small Business Administration (SBA) For Handyman
The SBA offers lending solutions to small businesses like handymen services. The application process is extremely detailed and requires a heavy amount of financial documentation regarding your credit history and your business. The SBA is a government agency, and they guarantee part of your loan and connect you to one of their partner lenders. When you apply for this type of funding, you are basically trying to win the approval of the SBA as well as a lender.
Things to consider:
- The wheels of government turn slowly and this is a government agency. It can take 90 days or longer to process your loan application.
- Your personal credit score, your credentials, and managerial experience within a practice may be scrutinized as part of the approval criteria.
- The entire application process is very rigorous because you have the SBA and a bank to satisfy with your documentation.
- Collateral may be required. Your liability will vary depending on which loan product you choose.
Alternative Lenders for Handyman
According to foxbusiness.com, successful entrepreneurs and small business owners don’t take no for an answer. The majority of them are turning to alternative lenders for simple, easy and flexible terms in financing. Alternative lenders typically offer several funding options and may include ways to limit risks, like a repayment schedule that changes to match a business’s sales volume.
Things to consider:
- The application process for the typical funding product is fairly simple, documentation is very basic (a few bank statements), and it usually can be done quickly and online.
- Alternative lenders tend to look more at what you have built for a business and its overall potential, rather than your credit score. So, if your credit score falls a little short, you still have an excellent chance at approval.
- It takes less time to get your cash. If you are looking to seize a new opportunity or deal with immediate cash flow issues, you can do so with confidence.
Business Lines of Credit
Alternative lenders also offer business lines of credit, which are usually designed for short-term needs like for buying new tools or equipment. Similar to a credit card, but with better rates, you will only be charged interest on the amount of funding you utilize.
Things to consider:
- Lines of credit often offer good interest rates, but are not for larger loans that cover long-term needs.
- Lines of credit have repayment terms of about 12 months.
Final Thoughts on Selecting the Best Loan for Your Handyman Business
Understanding your funding options can be very handy in making the best choice for your small business. Get the facts about application processes, approval expectations and other terms before you sign on the dotted line. Learn more about creative funding solutions, contact Credibly today!