HVAC contractors should explore nontraditional financing options

For many HVAC construction company owners, summer is the busy time of year when you're installing systems for newly constructed buildings.

Concurrently, building picks up in the spring and summer, giving your HVAC sales business plenty of opportunities for installing your systems in residential and commercial structures. However, now that winter is here, this time of year should not be put aside.

While you may not be installing many new systems, landlords and tenants will still be inquiring for your services in order to repair and replace damaged systems.

The winter of 2014 was the busiest "cold season" in years for the HVAC industry, with the "polar vortex" affecting millions of American cities and their populations. Subsequently, many had heat and ventilation problems, causing HVAC businesses to scramble for additional hands, extra equipment and more advertising. In the event something like that happens again, don't you want your business to be prepared for the oncoming demand?

When looking to expand, a small business will normally seek to obtain a bank loan, but for many companies, this is proving to be increasingly difficult. While banks are beginning to open up to small-business financing, their loans are still not being issued at the rates they were prior to the recession. But why? Two reasons: First, in the aftermath of the Great Recession, regulators came down hard on banks and mandated that they strengthen their lending standards moving forward. Second, even when businesses do qualify for a loan, banks are still reluctant to lend them money because they do not see it as the profitable venture that previously existed.

So with banks still not coming around to small-business financing, what can independent HVAC market companies do to get the financing they need for the winter?

An alternative

Alternative financing is, essentially, a faster and more efficient way for small-business owners to receive funding, as opposed to a bank. But what is it? How does it work?

Alternative financing is different from a bank in that approvals and funding happen much more quickly. For example, with an alternative financing company, you can apply for funding, be approved in the same day and have the money in your account within days of the approval.

Alternative lenders also do not have the same strict requirements that a bank normally does. For example, credit ratings are a prime indicator of whether or not a business will be approved for a loan. While a bank may want a credit rating of around 700, an alternative financer may only ask for a score of 500 and above. Other benefits of alternative financing include no collateral or personal guarantees, and a variety of quick and easy online applications that don't require the paperwork of a bank.

So once you apply for and receive money from an alternative lender, how can HVAC companies make use of it?

Longer operating hours: When a building loses heat - either residential or commercial - it is an emergency and must be attended to immediately. In order to respond to emergency situations, your HVAC sales business should think about having maintenance workers on call 24/7. Obviously, doing this requires extra capital to keep your business open, and to also pay employees overnight hours. Alternative financing can provide you with that capital.

Marketing money

Advertising and marketing: After last year's winter, no home or building owner wants an extended period without heat. But how will potential customers know about your business without the proper advertising and marketing campaigns? It's a fact that advertising and marketing initiatives require a lot of capital, and with alternative financing you can use the funds specifically for this. When it comes to advertising, your business may want to concentrate on radio, print and if you can afford it, television. In terms of marketing, HVAC businesses should look into things like search engine optimization and search engine marketing to increase their ranking visibility.

Equipment maintenance and repairs: Businesses that rely on tools and equipment don't ever want to get caught in a situation where an integral operations-related item becomes damaged and needs repairs. However, when this does happen, it's crucial to remedy the situation immediately, which is where alternative financing comes in. Because funding speed is such an important part of the concept, you will have the money you need to fix any equipment in no time.

Extra cash flow: Every business sometimes runs into money issues, including HVAC companies. You may need some extra money for whatever reason, whether it's for payroll, taxes, insurance - anything.

If you think your company will need extra money to make it through this winter, consult with an alternative financing company for more information on how funding solutions can help you stay profitable this winter season.

David Goldin is the CEO and founder of AmeriMerchant, an alternative small-business financing company. Contact them at (800) 267- 3790 or at www.amerimerchant.com.