David Goldin
David Goldin

Interdependent relationships exist all over the business world, but few are as symbiotic as the construction and HVAC industries. In fact, the majority of revenue for HVAC companies is generated from new construction projects. Because construction and HVAC businesses are so reliant on each other, you can imagine the impact that the financial crisis had on both parties.

The economic recession, which resulted from the collapse of the housing market, put a freeze on the construction industry from roughly 2009 to 2011. Things were grim during this time period, with multiple construction, contracting, and HVAC businesses having to slow down or even halt their operations completely. However, things are finally beginning to look up, which is evidenced by the increase in industry revenue. From 2009 to 2014, HVAC revenue grew 2.4 percent, and with the housing market back on the upswing, in addition to nonresidential building construction increasing, HVAC companies finally have something to sink their teeth into. But like any small business, independently owned HVAC companies need financing in order to take advantage of these opportunities and fulfill their goals.

Trouble with the Banks

For years, the main way small businesses obtained financing would be to go through a bank. A business owner would head to a bank, fill out paperwork, get their financials checked out, and wait to hear back for approval. But now? Ever since the recession, banks are now more cautious than ever about lending to small businesses. Small business lending in the U.S. has struggled to keep pace with small business expansion. At the end of the first quarter, small business lending was 18 percent less than its peak in 2008.

So if your HVAC company is unable to secure funding through a bank, what are the other options? Your business may want to look into alternative financing, a new and fast way for businesses to receive working capital.

What Is Alternative Financing?

Alternative financing is a form of business financing aimed to get owners working capital as quickly and easily as possible. If you’ve heard of a merchant cash advance, than you’ve heard of alternative financing. A merchant cash advance is generally the best and easiest way to receive financing from an alternative lender. Basically, with a merchant cash advance, a business can be approved for funding and receive the money within the span of a few days. In fact, most approvals are done on the same day, which is normally much shorter than with a bank.

Other benefits of alternative financing include:

Online applications: Alternative lenders have embraced technology, and many offer very quick and simple online applications that only take minutes to fill out, giving business owners more valuable time to run their business.

Relaxed credit standards: A bank will often ask for a credit score in the 700 range, but alternative lenders usually only seek credit scores that are 500 and above, which is very manageable.

Simple requirements: You often will not be asked to put up collateral against the working capital you receive from an alternative lender. Additionally, personal guarantees are not required, and your operating history and quality of earnings are not as important as when working with a bank.

Once you receive working capital from an alternative lender, how can it help improve your HVAC business?

Purchasing inventory: HVAC companies need products to sell and you can use the working capital you receive from an alternative lender to increase your inventory. Common items like furnaces, split a/c systems, and heat pumps aren’t cheap, and having extra capital on hand to purchase these items will go a long way in putting less strain on your finances.

Tool and equipment repairs: Naturally, in order to install the products you sell, you need to have the necessary tools and equipment. But what happens if a power drill breaks? What if your plasma cutting system is outdated and needs to be replaced? Your business can’t afford for little things like this to halt your operations, and alternative financing can help ensure this doesn’t happen.

Payroll: Sometimes, when things are tight, you may be under pressure to meet payroll. Hopefully this will never happen, but it is a problem that small businesses sometimes face. If your business is ever in a situation where you can’t meet payroll, an alternative lender can advance you the funds to make sure your workers are getting their paychecks in full and on time.

Expansion: Every business reaches a point where it’s outgrowing current operations and begins to look at different avenues of expansion. Whether it’s opening an entirely new location, purchasing more vehicles, hiring new employees, or expanding to another city, you can use the funds you receive from an alternative lender to perform any type of expansion you wish.

HVAC companies looking for additional working capital to finance their business should look no further than alternative financing. In a time when banks are reluctant to lend to small businesses, an alternative lender can provide business owners with the money they need to expand.