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6 Tips To Secure Funding For Your Roofing Startup

Like many other startups, you will need funding to get your roofing business to the top, where it belongs. After you launch, you?ll still need money to keep it running. We give you a short list of things to consider before deciding how to get those funds.


Maya Friedman
Maya Friedman
July 19, 2022

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The roofing service industry is one of the fastest-growing businesses today. More people are looking for affordable housing in urban and rural areas. Therefore, the demand for roofing services such as installing new roofs and repairs has increased, creating an opportunity for entrepreneurs to venture into it.  

But like many other startups, you will need to secure funding for your roofing business to get it off its feet. The funds will help you acquire all the resources you'll need in your business. For example, you may need to get licenses and insurance. Also, you need to market your business and hire the right labor. Finally, you'll need to purchase inventory and roofing software to help you manage your business to ensure it's running smoothly.  

All these require funding to run. Even after you have launched your business, you'll still need money to keep your business running, so securing funding should be a priority.  

However, before you go ahead and decide to get funding for your business, there are several things that you need to do. Here are some of them:

Create a business plan

The first thing you need to do when looking for funding is to develop a business plan. This document outlines how you intend to start and grow your business. It should include details such as the amount of money you need, what you plan to use it for, and how you will repay the loan. 

You need to be very detailed in your business plan as it will give you a better chance of securing funding. If you're not sure how to create a business plan, you can always seek help from a professional or use one of the many online templates. 

When looking for funds, investors may ask you about your plan. This will show them how you plan to grow your business, and it also shows the level of commitment you have towards your business. It can also be your guide on what needs to be done and when to avoid the pitfalls that are common with startups. 

Determine how much you need

Next, you have to calculate how much money you need to get started. This will give you a clear idea of how much money you should be looking for when approaching investors. It would help if you had a detailed business plan that outlines all the costs associated with starting your roofing business. 

Some of the things you should include in your calculation are the cost of licenses and permits, marketing and advertising expenses, the cost of inventory, the cost of hiring labor, and the cost of purchasing roofing software. Doing so will help you understand how much money you need to start and operate your business. 

Research financing options 

After you have determined how much money you need, the next step is to research all the financing options available. This will help you identify which option is best suited for your business. There are many financing options available for small businesses, such as small business loans, lines of credit, and venture capital.

The best way to decide on which financing option you'll need is to research the pros and cons of each option. This will ensure that you settle for the most suitable terms for your roofing business. Always remember that what works for another business may not work for you since you are all operating under different scopes.

Here are some of the financing options that you can explore to fund your roofing business:

1. Self-funding

One of the best ways to start your roofing business is by self-funding. You may not have any experience in the roofing industry, but this can be an option for you if you have some money. For example, if you have $15,000 saved up, you can use that money as seed money to start your own roofing company. You will need enough money to cover at least six months' worth of expenses until you start making profits from your new business venture. 

Alternatively, you can also collect payments from your customers and use them to expand your business. But for this method to be efficient, you need to ensure that your customers pay on time. You can achieve this by using professional invoicing templates from companies such as Jobber. A professional template will allow you to invoice faster and avoid inconsistencies. This, in effect, may encourage your clients to pay on time, and you can use the money to further fund your roofing business. 

Pros of self-funding

Self-funding your roofing business has several benefits, such as the following: 

Cons of self-funding

However, self-funding also has its drawbacks, such as the following: 

“An equipment loan is ideal for roofing startups because it allows them to buy equipment with no money down”

2. Equipment loan

One way to fund your roofing startup is by taking out an equipment loan. Banks and other credit institutions typically offer these loans, and they allow you to borrow money to purchase business equipment. Moreover, an equipment loan generally has lower interest rates than other loans because it is secured by the assets you purchased with the money from the loan. If you fail to make payments on your loan, the bank will essentially repossess or take back your purchased items or financed equipment as collateral. 

Under this type of loan, you can choose equipment acquisition loans, equipment leasing options, lines of credit, and cash advances on credit cards. This option is ideal for roofing startups because it allows them to buy equipment with no money down. Also, it can help you expand your roofing business to new markets. For example, this financing option will provide you with the equipment you need to transition when you want to try commercial roofing instead of residential roofing. 

Pros of equipment loan: 

Some advantages of using an equipment loan include the following: 

Cons of equipment loan: 

Some disadvantages of using an equipment loan include the following: 

3. Use crowdfunding

Crowdfunding is essentially a way for people to pool their money together to fund something traditional methods wouldn't normally fund. These are often small businesses or startups that need capital to get off the ground or expand. 

The beauty of crowdfunding is that it allows you to raise funds from various sources: family and friends, loan sharks, venture capitalists, and even strangers who believe in your idea or product. The most successful crowdfunding campaigns raise hundreds of thousands of dollars—but even if you fall short of that goal, you'll still have plenty of support from backers who want to see your idea come to fruition. 

Moreover, crowdfunding helps create awareness about your business. People who pull funds for your business can help you with marketing, or they can hire you to take jobs. This will help your business get a good head start.  

Pros of crowdfunding:

Crowdfunding has the following benefits: 

Cons of crowdfunding: 

Crowdfunding also has some drawbacks, such as the following: 

A group of workers install shingles on a residential rooftop with resources acquired thanks to
	business finance.

4. Traditional loans

There are several traditional loans that you can use to fund your business. These loans vary depending on the interest rates and repayment period:

When picking the type of loan to use in your business, consider the interest rate and the repayment period. These factors will affect how much you'll pay back on a monthly basis.  

Pros of traditional loans: 

Traditional loans have the following benefits: 

Cons of traditional loans: 

Traditional loans also have some drawbacks, such as the following: 

“Equity financing allows you to raise money without having to repay it”

5. Equity financing

Equity financing is another common form of financing for a roofing startup. In this case, you sell a portion of your company to investors in exchange for money. The amount of equity you need depends on how much funding you need and how much time you have before your business needs to be profitable.

The main benefit of equity financing is that it allows you to raise money without having to repay it. You can also get help with marketing and other aspects of running your business that will help attract more customers and make it more profitable over time. 

Pros of equity financing:

Equity financing also comes with several benefits, such as the following: 

Cons of equity financing:

However, there are also some drawbacks to equity financing that you should be aware of, such as the following:

A man working on a rooftop after launching his roofing business startup with help of business
	financing.

6. Merchant Cash Advance (MCA) loans

If you are a startup roofing company, you may be looking for ways to get the working capital you need to grow your business. A Merchant Cash Advance (MCA) may be a good option. This type of loan uses your future revenue as collateral which means you'll get the money you need now and won't have to worry about making repayments until your business is doing well. 

After your business starts generating monthly revenue, you can then use a certain percentage of your revenue to pay the loan. This could be a fixed monthly payment, a fixed daily payment, a percentage of your sales, or a flexible amount that fluctuates based on your sales volume. 

How merchant cash works 

Merchant cash is always structured so that startups can access loans and repay them once their business starts selling. The repayment method is often structured in two different ways: 

This repayment method is beneficial for startups because it doesn't require them to make fixed monthly payments. Instead, they can repay the loan based on their sales volume, which gives more flexibility. Therefore, the higher your sales, the faster you can repay the loan. 

This repayment method is good for startups with a consistent sales volume. In this case, the lender will make a fixed withdrawal from your business bank account regardless of how your business performs. However, this can have its downside if your business is going through a slow period. 

Fees structure in MCAs

The fees and interest rates in MCAs are often higher than traditional loans because they are considered high-risk loans. However, this doesn't mean they are not worth considering if you own a startup roofing company. Merchant cash advances can be a good option because they offer quick access to capital and flexible repayment terms. 

The companies will charge the fees based on a factor rate which is often between 1.1 to 1.5%. So, if you borrow $100,000, you would have to repay $110,000 to $150,000. In addition to the factor rate, other fees may be charged, such as an origination fee, which is usually a percentage of the loan amount. 

Features of MCAs

There are a few things that you should know about MCAs before you decide if it is the right option for your startup roofing company. But generally, the loan will depend on your cash flow and not your credit score. This means that even if you have bad credit, you may still be able to get a Merchant Cash Advance. 

Here are some of the major features: 

Pros of merchant cash 

Cons of merchant cash advances

Uses of MCAs

There are a few different ways that you can use MCAs. The most common way includes the following: 

Conclusion

Regardless of the changes in the roofing industry, funding for start-up roofers, or roofing companies looking to expand their small business is still within reach. As discussed in this article, you can look for crowdfunding options, take bank or SBA loans, equity financing, or self-fund your business. As an entrepreneur, you should do whatever it takes to secure funding for your business venture and be diligent about planning for future growth and profitab


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