Landscaping Business financing: Everything A Small Business Owner Needs to Know
Landscaping Business Financing: Everything A Small Business Owner Needs to Know
Starting a small landscaping business can be a gratifying endeavor, but it’s important to remember that success doesn’t come easy.
One of the most crucial aspects of starting and running a small business is securing adequate financing. Luckily, landscaping business loans can cover your basic operational costs as well as the fees you need to finance more ambitious landscaping projects.
In this blog post, we’ll outline everything you need to know about getting financing for your landscaping business. We’ll discuss different types of landscaping business loans available and the key considerations when applying for one.
Read on for all this information and get your landscaping venture off the ground!
What is a Landscaping Business Loan?
A landscaping business loan is exactly what it sounds like - a type of financing that provides your business with the capital you need to cover regular costs and expenses.
Small businesses, including landscaping companies, use this form of financing for various reasons, including covering an unexpected shortfall in cash flow. Or if their day-to-day activities require more money than their current cash flow allows.
Sometimes landscaping owners look to scale up, so they want to secure additional cash to expand their services.
The type of loan you’ll need depends on your specific needs, as well as the amount of capital you’re looking to finance. landscaping loans
To find out more about how you can determine the type of landscaping loan you require, you need to answer three essential questions. Read the following section to find out what they are!
Finding the Best Lawn Care Business Loans by Answering Three Questions
Several Landscaping loans exist to cater to lawn care business owners. But what is the specific loan that can fulfill your needs and company goals?
If you want to know which landscaping loan is best for your business, try to jot down your answers to these three main questions:
1. What Do You Want to Finance?
Before looking at lawn care business loans, you need to assess your business needs. You might consider taking out one of these loans to finance:
- A big project, like new equipment or a renovation project
- Your company’s working capital requirements
- Hiring new staff
- Your marketing efforts
2. How’s Your Cash Flow?
Your business’s cash flow is another essential factor. How will this loan affect your cash flows?
- Will it give your company the extra boost you need to meet all of its day-to-day expenses?
- Will this provide you with capital for large projects or opportunities?
- Do you have adequate revenue going in your business all year round, or is it affected by seasonality?
3. How Healthy is Your Business?
In addition to evaluating your cash flow, it’s also essential to consider the general health of your business.
- How long have you been in business?
- What are your business and personal credit scores?
- Do you have a solid business plan that outlines how this loan will help you achieve your objectives?
Generally, you must have a positive cash flow that would not deter lenders from providing you a loan for your company. If they see that you have a strong business plan and good credit scores, there’s no reason for them to reject your application.
Best Loan Options for Landscaping Businesses
Several different landscaping business loans are available, each catering to specific needs and requirements.
Here are some examples of the most common types:
1. Equipment Financing
Many landscaping businesses rely on equipment for their day-to-day operations.
As a result, they need to ensure that it’s in good condition and running order to meet industry standards. For example, if you’re looking for lawn mowers, the process should be seamless during your work hours.
These loans are a great option if you’re worried about putting up additional collateral because they are “self-collateralized,” which means that the asset you’re financing becomes the loan’s collateral in case of default.
However, before applying for this type of loan, ensure that the asset is depreciable and in good working condition. This will greatly improve your chances of getting approved for a high loan at attractive rates.
Some benefits of a landscaping equipment loan include:
- Having a good credit score (you don’t need to have an excellent score to apply)
- Having been in business for a while (not required to be a highly seasoned business)
- Having a moderate amount of revenue stream (no requirement for high revenues)
Unlike an equipment lease, an equipment loan lets you buy your equipment outright. So, you’ll want to ensure to use this loan on a piece with long life, or that won’t get outdated too quickly–since the term of these loans typically lasts the lifespan of the equipment.
2. Invoice Financing
Invoice financing is a type of commercial loan that allows you to borrow against the money you’re owed.
This might benefit your business if most of your clients pay within 30 days, but they don’t provide payment in advance.
You can use this source of credit to finance your business’s cash flow gaps, particularly if you experience a slow month or two.
It’s also helpful to have enough spare time to negotiate deals with potential lenders. Suppose you don’t want the hassle of finding the best invoices for financing. In that case, you can always sell your accounts receivable at a discounted price by partnering with an invoice factoring company.
3. SBA Loans
If you need funding on a large scale, one of the best business loans to consider is the Small Business Administration Loans or SBA.
The US government administers these loans, but lenders are specifically chosen to provide them to borrowers.
The SBA guarantees the loan up to 85%, depending on the amount, which means that lenders (often small banks) can offer some of the most competitive rates available because their risk is lower.
This type of financing provides loans that range from $5,000 to $5 million for commercial real estate and equipment purchases.
The good thing about this loan is that it doesn’t have a lot of stringent requirements.
- It offers lower interest rates
- It provides more extended repayment periods
- A personal credit score of a minimum of 650
As long as you meet the minimum eligibility requirements, you can usually get approved for an SBA loan in a short amount of time. credit score
However, keep in mind that all borrowers must have strong credit scores to apply for an SBA loan through a traditional lender. If you don’t meet this requirement, you might qualify for an SBA loan with a credit union.
4. Business Line of Credit
Many business owners consider a line of credit to be the best possible solution when they need extra cash.
For example, if your company needs $30,000 to pay for last month’s expenses, you can apply for this type of loan and receive the funds within a few days.
This type of loan is different from a traditional loan because you only borrow the funds when needed and for as long as you need them. You will usually get an approval decision within 1-2 business days, which means that you’ll have your money quickly and easily.
However, be aware that this financing option is categorized as a short-term solution because it is a revolving line of credit.
This means that you can borrow and pay back as much money as you require each month, but you’ll have to provide supporting documentation for your repayment transactions.
If there’s no outstanding balance on this account, which will happen if you’ve been consistent with your repayments, you won’t have to document transactions when using it.
Some features of this loan:
- Provide lower interest rates than business credit cards
- Offer flexible repayment terms
- Loan amounts can be between 1000s to million or more
Keep in mind that business lines of credit are short-term, so it’s best to utilize them when you require immediate cash or in case of emergencies.
Applying for a Loan as a Seasonal Business Owner
For small businesses with cyclical revenue patterns, it’s crucial to show lenders your financial strength with a bank statement that includes your highest revenue months.
Typically, when applying for a seasonal business loan, you need to provide your latest bank statement (not older than 4 months). Presenting your highest earning months can be challenging if you’re unaware of your most profitable months.
That’s why it’s essential to keep track of your earnings and expenses to decide when you can successfully apply for a seasonal loan and secure your financing.
Long-term loans won’t be a suitable option for you if your revenues are not consistent throughout the year since they require monthly installments. For seasonal business owners, it’s best to go for short-term loans that can cover your expenses in the low season.
Here are two of the most common short-term financing options:
1. Short-term Loans
Think of these loans as short-term term deposits. They operate similarly to a traditional lump-sum loan but with lower credit requirements and less time in business needed for approval.
Short-term loans come with high-interest rates of around 10%. But it’s easier to get approved for one than a long-term loan since you don’t need to have an excellent credit score, you can be operating in the industry for a few years, and your revenue doesn’t need to be so high.
If you’re looking into taking out some money before peak season starts (or any other difficult financial decision), consider securing your funds through a short-term loan.
2. Business Credit Cards
Applying for a business credit card is often the simplest way to get started if you need a quick cash infusion.
Business credit cards are unsecured, so you don’t have to pledge any collateral to get approved. This is helpful for business owners with poor personal credit scores because it can be challenging to secure a traditional loan from a lender when your score isn’t very high.
These cards are available from all major card providers and offer competitive interest rates and terms.
APR credit cards
One of the types of business credit cards is 0% introductory APR credit cards. These cards can be helpful for businesses that need some breathing room to meet their expenses.
With a 0% introductory APR credit card, you won’t have to pay interest on purchases or balance transfers during the first 12-18 months of your account’s life.
If you’ve got strong business credit, you might be able to qualify for one of the many 0% introductory APR credit cards.
However, keep in mind that your introductory APR will revert to a standard interest rate after the intro period is over. This means that you need to pay off all of your balances before the end of the promotional period, or else you’ll be hit with high-interest charges.
But as these periods are often longer than 12 months, you can spend the amount in the off-season and repay it when your revenues are high again.
Secure A Landscaping Loan that Fits Your Needs
If you’re looking for a landscaping business loan, there are plenty of options to choose from. Each type of loan has its set of requirements and benefits, so it’s essential to understand what each one can offer your company.
At Select Funding, our lending experts are here to help you find the perfect loan for your needs. We’ll consider your business’s unique situation and work with you to get the funding you need to achieve your goals.
So fill out our simple form today and let us help you get started on reaching success!