How to Secure a Business Loan to Grow Your Roofing Company

Roofing projects are among the most expensive home improvement projects for homeowners. However, they’re also very expensive for roofing contractors themselves, too. Plus, as a seasonal business, roofers may experience revenue lulls throughout the year, which can make it difficult to plan for the future or grow the business.

Offering roof financing options to customers is a good way to get paid upfront for your work, but not every business has that luxury. Whether you’re looking to ease cash flow concerns, shore up working capital for specific projects, or you want to grow your company this year, financing for roofing companies can make a major difference.

In this article:

• How real business loans can offset the high costs of roofing projects.
• The best types of financing for roofing companies.
• How to take a business loan on and use it to grow your business.

The Costs of Roofing Projects

While customers can take out home improvement loans, home equity loans, home equity line of credit (HELOC), use a homeowners’ insurance policy, or other loan options to pay for a roofing project upfront, that isn’t always the case. Some roofers may offer payment plans to customers, but unless they’re working with a finance company, that slows down their cash flow. None of that changes the fact that roofing projects are very expensive.

The average cost of a new roof for homeowners is $11,000, and roofing contractors often carry those costs upfront, limiting their ability to grow. Some of these key costs include:

• Materials and equipment: Roofing materials are very expensive, whether you’re performing basic roof inspections, doing a full roof replacement, or installing a new roof. From shingles to gutters to tools, the various materials for a project will depend on specific roofing needs, but they’re sure to add up quickly.
• Insurance and labor: Roofing is a very dangerous job, so roofing contractors need liability and business insurance for protection. Financing for roofing companies can help cover increasing premiums as your business grows, and support the high cost of hiring employees to work a dangerous job.
• Warranties: Roofing companies often offer a warranty on their work, which may expose them to unpredictable costs down the line if customers demand that the work be redone. Financing for roofing companies can help support customer service and financing programs like these.
• Seasonality: In many parts of the country, roofing companies aren’t working for several months of the year. Some loan products are designed as contractor financing with this exact unpredictability and inflexibility in mind. Financing for roofing companies can help you both cover costs in the slow season and provide flexible loan terms or payment options to let you repay the money when business picks back up.
• Slow payment cycle: As we said, some roofing companies may provide payment plans or offer financing to clients for roof repairs and other projects. That’s because such expensive projects can often put a burden on homeowners or small business owners. Financing for roofing companies can be used to reduce the hassle of collecting invoices, facilitate upfront payment for projects, and allow roofing contractors to offer low monthly payments to customers without experiencing a significant burden on their own cash flow or working capital.
• Expansion: Finally, roofing companies can increase their margins by expanding their business into new markets and getting more business. Expansion is expensive, however, so financing for roofing companies can support the increased costs.

These challenges make it clear that small business loans and other financing for roofing companies can make a big difference.

Types of Financing for Roofing Companies

Both traditional lenders, like banks and credit unions, and online lenders offer financing for roofing companies. Determining the right type of financing, however, may depend on several factors. These are some of the most common types of financing for roofing companies:

• Term loans: Conventional loans in which a lender pays your business an upfront, lump sum payment that you repay with monthly payments based on an interest rate. You can use these loans for any business purpose, from materials to marketing in a new area.
• SBA loans: The U.S. Small Business Administration (SBA) offers several loan programs that may serve as contractor financing. The popular 7(a) program offers both term loans and working capital lines of credit that may serve as flexible, affordable financing for roofing companies looking to expand. While they offer some of the most competitive loan terms, SBA loans tend to have strict eligibility requirements.
• Business lines of credit: A business line of credit is a flexible funding solution that functions a bit like a credit card. A lender approves your business for a maximum loan amount, and you only pay interest on the amount you withdraw. With a revolving line of credit, once you repay what you’ve borrowed, you can access the full amount again. It’s flexible financing for roofing companies that can adapt as your business grows.
• Equipment financing: When you need to purchase specific equipment, an equipment loan functions as a secured loan for that equipment. While unsecured loans don’t require collateral, an equipment loan typically uses the equipment itself as collateral, meaning the lender may seize it if you don’t repay the loan. Equipment financing may be an affordable way to scale your operations as you expand into new markets.

How to Get Financing for Roofing Companies

Both traditional lenders and online lenders may offer financing for roofing companies. Traditional lenders typically offer lower interest rates and higher loan amounts, but will likely have a longer approval process and stricter eligibility requirements. Online lenders often offer less stringent qualification requirements and have faster funding timelines, but typically at the cost of higher interest rates.

Regardless of whether you’re working with a traditional or online lender for financing, the process to get financing for roofing companies will look like this:

• Determine your funding needs: First and foremost, you must decide how you’ll use funding. If you’re looking to expand, you may have specific equipment needs or more general needs for hiring, marketing, and more. If you have open-ended funding needs and you’re ready to expand immediately, a term loan or SBA loan may make the most sense. If you want to expand gradually or are concerned about economic downturns, a business line of credit may offer better flexibility.
• Compare lenders: Lenders will vary in their qualification requirements, available loan terms, and interest rates. You can compare requirements online to see if your company may be eligible, but you may have to go through a pre-approval process to understand the terms and interest rates available to you.
• Gather documentation: When you’ve found the right lender and loan product for your expansion goals, it’s time to gather your documentation to apply. Requirements and application processes vary, but you’ll likely need your business licensing information, financial statements, tax returns, and a business plan to qualify for financing for roofing companies.
• Apply and wait: Many lenders allow you to apply online, but you might have to apply over the phone or in person. Typically, traditional lenders have longer underwriting and funding times than online lenders.

Final Thoughts

Financing for roofing companies can help your business expand into new markets, hire new employees, or just help bridge a slow time of year. When you’re ready to grow your business, term loans, SBA loans, business lines of credit, or equipment financing could all be significant assets. With this guide, you’ll know how to compare lenders and find the right financing for your company.

FAQs

How can you expand a roofing company?

Financing for roofing companies is a great asset if you’re looking to expand your business. It can help you hire more staff, purchase more equipment and materials, and market to new customers in a new area.

What types of financing work for roofing companies?

Some of the ideal financing options for roofing companies include traditional term loans, SBA loans, business lines of credit, and equipment financing.

How do you get business financing?

The application and approval process will vary by lender, but usually, you’ll need to research what loan products and terms you may qualify for before choosing a lender. When you’re ready, you’ll need to submit your business information, licensing information, financial statements, tax returns, and business plan with your application. Then, wait for approval and funding.

What do I need to qualify for business financing?

To qualify for financing for roofing companies, you will likely need to have a good credit score, a history of strong revenue, and at least a year in business. Requirements vary between lenders, however, and online lenders tend to have less strict qualification requirements.

Should my roofing business offer financing?

Many roofing companies choose to offer financing or payment plans to customers, especially when expanding into new markets. This can be a good way to acquire new customers and make it easier for companies to get paid for their work upfront — both significant benefits for growing businesses.

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