Electrical enterprises play a considerable role in contributing to societal and commercial success. In addition, electrical business owners offer electrical services and products that many consumers depend on every day.
Like any other business, electrical enterprises require cash to run- there are expenses to be met for smooth operations and customer satisfaction. However, it is not always that owners have access to funds. Established owners may find it easier to access funds, but beginners can find it difficult.
The good news is that there are loans that can help electrical business owners having financial difficulties. This article gives a comprehensive guide to electrician loans.
What is an Electrician Loan?
It is money borrowed to fund an electrical contracting business, either by an electrician or an electrical company. These loans generally provide one’s or a company’s working capital.
The funds can be availed to start an electrical business venture, hire employees and manage a growing team.
Electrician loans also help business owners to build inventory, own electrical equipment or machinery, sort out payroll, take care of repairs, advertisements, and more.
What Solutions of Electrician Loans are Available?
The electrician loans market has different types of loans available to meet specific business situations or fit different needs. Therefore, finding the right platform to borrow from requires guidance, especially for new borrowers.
Traditional banks, financial institutions, and online lenders are the most common loan givers for electrical ventures.
Obtaining these loans from a traditional bank and financial institutions may prove more challenging, and the application processes can also be longer. Online lenders are generally less strict and can provide funds faster.
Short Term and Long Term Loans
Borrowers can receive long-term and short-term loans. Long-term loans are repayable over a more extended period than short-term loans. Short-term funding will usually be paid back within six months to a year or a year and a half. It is ideal for those who want to support a specific electrical business strategy. Long-term funding can go even for more than five years.
Electrician loan borrowers can also apply for secured loans, but these require collateral or a co-signer, especially where the borrower does not qualify to borrow from a traditional lender.
A Business Line of Credit
Those who need flexible financing can opt for a business line of credit whereby they are granted access to a revolving credit line. It is usually the same as a credit card with a credit limit, and borrowers only pay interest on the borrowed money. Additional funds are availed as one repays. A business credit card for an electrical business owner or contractor can be used alongside other options.
Merchant Cash Advance
Another possible electrician loan option is merchant cash advance. It allows borrowers to borrow against their earnings in the future. Typically, these loans are given as a lump sum, and borrowers repay them through a percentage of their sales.
Small Business Administration can also come in handy for electricians. These are long-term loans, and they have fixed interest rates. The borrowing terms and rates are usually flexible, but the application process can be lengthy with a lot of paperwork, collateral provision, and strict credit checks.
The most popular SBA program for electrician loans is SBA 7(a), but electricians can also borrow through the 504 programs or the new SBA Paycheck Protection Program loan.
If an electric business needs equipment or machinery, owners can consider equipment financing. Big electrical equipment or machinery tends to be very expensive, but this kind of funding allows business owners and contractors to obtain money for essential equipment purchases or repairs.
Equipment financing is an excellent way to put up collateral for the loan borrowed. It is usually structured as a fixed-term loan or a lease to purchase. If the business needs equipment or machinery for a short time, owners can consider loans that cater to leasing or renting the equipment.
Invoice financing is another option for electrical contractors and electricians who are growing and require cash fast for finished but unpaid work. It allows them to leverage outstanding invoices by tapping into money owed to clients. Advances are received before the time of invoice payment. This will not usually be a loan but invoice funding.
The Application Process and Possible Borrowing Considerations
Every lender will usually follow specific criteria before they can provide a borrower with a loan. Some of the requirements needed aid in determining a borrower’s ability to pay. For example, some lenders may want an applicant to be of a certain age (mostly 18 years and above) and be a citizen/resident in their country of operation.
A credit score check is also a possible analysis metric, especially for traditional banks, but some platforms can still give applicants bad credit electrician loans. Such lenders may analyze the growth potential of an electrical business venture to provide funding.
Having a good credit score increases a borrower’s chances of approval and also plays a role in determining the interest rates charged. Conversely, poor credit borrowers may get loans, but the interest charges are typically higher. Therefore, those who intend to borrow and have bad or poor credit must aim to improve their rating even after a bad credit loan approval.
Even for those who are relatively new in the business, most lenders may ask to see that they have been in operation to determine the minimum or maximum limit they can lend.
The loan amounts may vary. Lenders give them based on how much a borrower is applying and the nature of their business, i.e., how much business they conduct.
It is always good for electrician loan applicants to compare various lending platforms and work with a lender who seems flexible and has accommodating terms.
The nature of the electrical industry requires owners to have adequate financing to run the operations smoothly as they balance other projects. Those looking to venture into the electrical business need to know that various avenues can provide them with the funds for the business. They can take advantage of electrician loans to grow a dream electrical venture successfully.