Are you looking for ways to fund your new commercial roofing company?
Diving into commercial roofing, no matter your background, can be a tricky venture to navigate. Whether you have owned a residential roofing company and are ready to go commercial, or if you’re just starting out and want to focus on commercial jobs, breaking into the industry will be difficult. Although it can be intimidating, taking the leap of faith and committing to starting a commercial roofing venture could be a lucrative business move that pays off, as commercial roofing jobs come with much bigger contracts and offer more frequent work. If commercial roofing is something you and your team are looking to break into, here are some suggestions to get your business off the ground, or to start a new branch of your existing business.
Create a Business Plan
Whether your commercial roofing company is going to be a completely new business or is being merged into an existing residential roofing business, it needs to have an explicit plan. What are your business goals? How many new clients and projects can you take on comfortably? What are the finances and taxes associated with this new business? What can be financed and what needs to be paid in full immediately? Write out all your plans so you can present them to any employees or business partners. This initial planning will put you in good shape to find your funding and determine when you’ll turn a profit. It’s best to reevaluate your plan every quarter to see if you’re on track to meet your goals and if you need to adjust your plan going forward.
If you are looking to expand your residential roofing business then a loan from the Small Business Administration is the first funding option you should consider. SBA loans are a great option for business owners that have been in business for a bit and are looking for more favorable terms compared to traditional banks. The SBA works with verified lenders to provide an array of lending products for business owners that have more flexible terms than a loan from a bank alone. The type of SBA loan you choose will depend on what you need the money for. Some of the top SBA loans to look into are:
- SBA 7(a) Loan – This loan is the most general loan serviced by the SBA. Business owners can apply for up to $5 million with this type of loan. The funds usually are used for real estate purchase, equipment costs, operating expenses, and debt management.
- SBA 504 Loan – 504 loans are a bit more restrictive than a 7(a) loan. 504 loans are mainly used to purchase real estate, office space, or construction. If you need a new home base for your business, a 504 loan is a good choice.
SBA loans are a great way to expand an already existing business. As a note, each loan will come with its own set of criteria to qualify for funding. Getting all of your past transactions, expenses, and any other financial materials together ahead of time will help make the process easier.
While the SBA is great for already established roofers that are looking to break into commercial roofing, the same can’t be said for brand new business owners. Almost any SBA loan will require collateral, proof of profit, and more. The biggest hurdle is that your business will have to be in operation for at least two years before applying.
So where does this leave new roofers? There are still loan options out there, but you’ll have to look outside the box a bit.
For newer businesses, a personal loan is an easy way to gain access to capital for your business without breaking the bank. Personal loans are a good option for newer businesses as the lender will only take into account your personal financial situation. This means you won’t need to be in business for any period of time before applying for a loan. Do make sure your existing credit score and financial situation are in good order before applying for one of these loans.
A personal loan will likely have a lower limit of cash you can take out, so these loans are great for just covering extra expenses and costs associated with starting a business. Loans can be used for things like equipment, gear, and hiring when just starting out.
Equipment financing is another funding option more tailored towards already established roofers that are looking to expand into the commercial side of things. When expanding into commercial roofing, there will be a laundry list of new gear, tools, and supplies that you’ll need to purchase. If your finances are in order elsewhere, an equipment loan could be the only thing you need to transition into doing commercial roofing jobs.
Some of the top roofing materials to include on your list are:
- Power sweepers
- Spudding equipment
This is just scratching the surface of the equipment you could purchase to start a commercial roofing business.
Another way to fund your commercial roofing business is to take your proposal to others who would be willing to invest. Investors will put up a portion of your start-up costs in return for their money back over time and a portion of your profits after your loan is paid off. Some investors might ask to be included in business decisions, while others may ask to be silent investors. There are plenty of ways to find local investors, however before bringing one on, ensure your plans for company growth align. Make sure you cover all the important topics for your roofing business, like the size of projects you’ll do, how many projects, the types of projects and products you’ll offer, the areas you’ll cover, and how many employees you can manage. Having these discussions up front will help avoid conflict in the future.
Another method of getting your new business off the ground is self-funding. This means using assets you already own to finance your new project. Maybe you have a savings account for new projects or maybe you feel comfortable dipping into a 401k. The most common asset used for this is your home, and considering a home equity loan could give you the cash needed to get your business off the ground. Be sure to track this spending carefully as you’ll be entangling your business and your everyday finances. Many business owners use this technique to start their businesses, but it’s always best to be organized, especially when personal money is involved. This is a great way to get your business up and running without involving other stakeholders. Of course, this is the riskiest of the funding options.
Fund Your Commercial Roofing Business
As you begin this new chapter in your business, remember you’re not starting from scratch. Use the contacts you’ve built over the years in your other roofing work to see if any of your clients own businesses that would benefit from commercial roofing. Use word-of-mouth advertising and rely heavily on previous positive reviews to get the word out about your new business venture. No matter the source of your funding, stick to your business plan and your training, and you’ll be on the path to a successful commercial roofing business in no time.
Who are we? Find out more about Castagra and Ecodur Roof Coating here!