Business Funding: 6 Ways to Finance Your Cleaning Business Without Going Broke

Money comes in many ways. Figure out what makes sense for your situation!

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!

Basic Start-Up Costs: How Much Does it Cost to Start a Business?

You constantly ask yourself – how much does it cost to start a business? Costs of starting a cleaning business is generally affordable especially if you work within your budget and purchase items only as needed. You can opt to finance and grow your business as you get more clients.

Life of a Cleaning Business Startup

On average, you will need no more than $1,000 – $2,000 to be a business owner. In the beginning, you may also prefer to do most of the work to avoid or reduce salary expenses. The challenging part is getting an initial client base. To do so, you can try reaching out to friends and small business owners and offer your services. As with any business owner who is starting out, perseverance and hard work is crucial especially in the early stages. Also, check out your local government to see if you can get a small business loan.

Register your cleaning business

The cost of registering your cleaning business startup depends on the type of business you want. The Sole Proprietorship is the least expensive business type to register for with costs anywhere between $30 – $60 at your local County Clerks Office. A Limited Liability Company (LLC) is slightly more expensive with costs ranging from $100 – $500.

Open a bank account

You will need to open a checking account for your business after you register your business name. Banks generally require a deposit of $100 although this money is yours so it is not really an expense.

Get insurance

The third step after registering your business and opening a checking account is to look into getting liability insurance. This type of insurance will cost roughly $500 – $2,000 per year. Depending on which state you live in, you can pay your insurance bills monthly which means you do not need to shell out the entire amount at the start of the year. As your business grows and you hire a cleaning staff, you may need to get workers comp coverage as well.

Purchase cleaning tools and products

If you are starting a small household cleaning business, you may find some items you need from your home. You can then supplement with other chemicals and supplies from a nearby store. The amount of supplies you need will depend on the cleaning services you offer therefore your cost will vary.

In general, you will need basic cleaning supplies and tools such as sponge, disinfectant, paper towels, and mops. There will be a few more expensive items in your inventory such as a vacuum cleaner. However all in all, $300 – $500 should be enough to get you started.

Note that you do not need to buy all the tools and products you need before signing up your first clients. You can make these purchases in almost real-time. The only downside is that items are cheaper if you buy in bulk but you can do this once you gain a regular and loyal set of clients.

Develop business and promotional materials

Consider having business cards and flyers printed out. Whenever a client asks you for a business card, it shows professionalism if you have these on hand. Business cards typically cost $50 to get a couple of thousand printed out. If you employ staff for your cleaning business, you may also want to consider wearing uniformed shirts or aprons with your business name and logo which will cost around $100 – 200.

As you see, starting a cleaning business requires a fairly low investment. However, be prepared to wait for 3 – 6 months before you start to become profitable. If you can, keep your day job and be financially conservative so that you can better sustain the business and weather growth challenges. That’s the secret to understanding how much does it cost to start a business. Remember that cost is only one part of the equation.  Review how to increase your revenue by reviewing Part 1 and Part2 for how to price your services!

Are you a cleaning business startup? Tell us how much it costs for you below!