Whether starting your own cleaning business from home or embarking on a larger cleaning company, you will need business funding. Here are five options that you should consider to finance your cleaning business.
1) Personal Savings (INVEST IN YOURSELF!)
Personal savings is the easiest and most common way to fund your business. There are no interest expenses nor creditors that will come knocking on your door if you are late on your payment. Consider this an interest free or interest rated loan. But, set a series of payments to pay yourself back!
However, most people have already planned for how to use their personal savings such as retirement or the kids’ education. It will help if you have extra cash that you can dip into. Otherwise, you can start saving a small portion of your income or savings each month to use for your business.
2) Family and Friends (Also known as the “Father-Mother Fund”)
Are you ready and willing to risk relationships by mixing personal and business? One advantage for approaching family and friends is that some banks may not be willing to extend loans to people who are starting their first business. With family and friends, funding may be readily available with less contractual hassles.
However, there are risks to involving your family and friends and do proceed with caution. If the business fails or success is taking longer than expected, Money issues can strain relationships. Asking for money can be awkward. It is easier to accept rejection from someone you don’t know personally because then you understand that it was a business decision. Worse is if for some reason you are unable to pay people pack which will effectively ruin your relationship. You know the nature of your relationships best so consider these factors before asking for funding.
3) Small Business Administration Loan: 7(a) guarantee small business loan
The common type of loan offered by the Small Business Administration (SBA) to help you start your cleaning business is the 7(a) guarantee small business loan. You can apply for the 7(a) loan at any bank that participate in the SBA loan process.
Generally, the 7(a) loan program is for business that are already two years since inception and are generating cash flow. Since not all banks offer this type of loan, select one has offered this on a regular basis to make the process easier and simpler for you. Learn more by visiting the SBA loan program website to check your eligibility. This may be the easiest way to get a small business loan.
4) Business Loan
Getting a business loan is another way to fund your cleaning equipment and startup costs. Business loans are usually short term ranging from 5 to 7 years, depending on the type of financing. You will need to offer a collateral to secure the loan such as real estate or another type of asset.
To get started, you will pay a loan origination fee and also interest. However, if the bank you reached out to only offer loans for an amount beyond what you need, you can try to reach out to other financial institutions that may be more flexible. Be prepared to provide details on the amount and purpose of the loan and how you plan to repay it. Submitting documents such as tax returns, checking and savings accounts, as well as credit score will help
5) Business Line of Credit
A business line of credit is relatively easier to get compared to a business loan. It is an unsecured loan and you can use it to finance your costs as you incur these instead of borrowing a lump sum upfront.
It can be used to refinance debt as well as to finance working capital, payroll and all the same types of expenses as a credit card financing. It is typically designed to be a short-term loan and may have a variable interest rate and an annual fee. Some banks may only offer large business lines of credit, such as $25,000 and up, so this may not be the right option for you if you only need access to a small amount of credit.
6) Credit Cards
If you already have or if you qualify for a credit card, you can always use this to pay for some of your initial costs. One advantage for using your credit card is that the minimum monthly payment is low. If you are only starting out and not yet cash flow positive, you can put your expenses on your card and just pay the minimum requirement.
However, there are many disadvantages to using credit card financing. The biggest disadvantage is that interest rates are high and your balance can build up very quickly over time. Annual interest rates can go to 24% or higher which is much higher than the 5% – 6% interest rates on commercial loans. To learn more, you can check out The Pros And Cons Of Small Business Credit Cards.
There you go! Business funding is key early on when starting your cleaning business. If you already have a cleaning business, share your thoughts below on how you financed your business and what worked or did not work for you.
Comment below if you have different business funding tips or tricks!