HVAC Business Loans: What They Are & How to Get Them
You need a new truck or van. Or maybe you're ready to hire another tech, but you don't have the cash upfront. Maybe you want to expand into commercial work, but the equipment costs $80,000, and your bank account says it's not a good idea.
HVAC business loans help you fund growth without draining your cash reserves. But the problem is that many HVAC contractors don't know which loans make sense for their HVAC business, what lenders look for, and how to get approved at a decent rate.
Here's everything you need to know about different financing options for HVAC companies.
Need help getting your financials loan-ready? Therapeutic Tax Solutions helps HVAC contractors clean up their books, track profitability, and prepare documentation that lenders trust. Book your free discovery meeting!
Why Business Loans for HVAC Contractors Are Important
Growing an HVAC business costs money upfront. You need trucks, vans, equipment, technicians, and inventory before you can generate the revenue to pay for them.
Many HVAC contractors also deal with seasonal cash flow. You're usually slammed in summer and winter, but spring and fall are slow. So, saving up $50,000 for a new truck when you're covering payroll through the slow months can take years.
Meanwhile, opportunities don't wait.
Business loans let you move fast when the timing is right. Here are the most common reasons HVAC contractors seek financing:
Buying service vehicles: Trucks and vans are expensive, and your business can't grow without them.
Purchasing equipment: Diagnostic tools, HVAC units for installations, specialty systems for commercial work...ALL of it costs money!
Hiring and training new technicians: You need cash flow to cover payroll and training costs before new hires start generating revenue.
Expanding service areas: Opening a second location or covering a wider territory means more overhead before you see the return.
Adding new service lines: Moving from residential to commercial, or adding services like duct cleaning or indoor air quality all require upfront investment.
Covering payroll during slow seasons: If your cash reserves are thin, a line of credit can bridge the gap between busy seasons.
Buying inventory in bulk: Negotiating better pricing with suppliers requires cash upfront.
Acquiring another HVAC business: Buying a competitor's customer list or entire operation can accelerate growth, but banks want to see strong financials before they'll fund it.
Overall, HVAC business loans can give you the capital to grow without waiting years to save up...but ONLY if you borrow smart and your business can handle the payments.
Learn more about successful strategies for HVAC business management.
Types of Loans for HVAC Contractors
Traditional Bank Loans (Term Loans)
You borrow a fixed amount, and then pay it back over a set period with monthly payments. Banks offer some of the lowest interest rates, but they're also the hardest to qualify for.
Fewer small businesses are going this route, with only 39% seeking financing at big banks in 2024, down from 44% in 2023. Banks want a good credit history, solid financials, and usually collateral.
This type of business funding is best for major purchases like trucks, equipment, or business expansion when you need a large amount and can wait through the approval process.
SBA Loans (Small Business Loans)
SBA loans are backed by the Small Business Administration, which means that lenders take on less risk and can offer better terms. According to the SBA, their average loan size is about $417,316, so these aren't small amounts.
You'll get lower down payments, longer repayment terms, and competitive interest rates. But the application process is lengthy and requires detailed financial documentation.
Business Lines of Credit
A line of credit works like a credit card for your business. You get approved for a certain amount, draw what you need, and only pay interest on what you use. Once you pay it back, you can borrow again.
Rates are usually variable, and you'll need decent credit to qualify.
Small business owners can use this option for managing cash flow gaps, covering seasonal slowdowns, or handling unexpected expenses without taking out a full loan.
Equipment Financing
As the name suggests, equipment loans are loans for buying equipment, and the equipment itself serves as collateral. That makes it easier to qualify than traditional loans.
You can finance heating and cooling HVAC units, diagnostic tools, vehicles, or any other equipment your business needs. If you default, the lender takes the equipment.
Invoice Financing / Factoring
If customers owe you money but haven't paid yet, invoice financing gives you cash upfront. You sell your unpaid invoices to a lender at a discount, and they collect payment from your customers.
It's fast and based on your receivables, not your credit score, but it's expensive and eats into your profit margins. You may use it for bridging short-term gaps when customers pay slowly, though you're better off tightening up your collections process long-term.
Merchant Cash Advances
The lender gives you cash up front, then takes a cut of your daily credit card transactions until it's paid back. Approval is fast, and the paperwork is minimal.
But merchant cash advances are extremely expensive. These are some of the highest-cost financing available. They can wreck your cash flow because payments come out daily, regardless of whether you're having a good month or a bad one.
Learn more about improving your HVAC profit margins.
What Lenders Look for When You Apply for Business Loans for HVAC
Unfortunately, lenders don't care about how hard you work or how much your clients love your HVAC services. They care about one thing: Can you pay them back?
Here's what they'll look at when you apply:
Credit score: Most lenders want a score of 650 or higher, and lower scores mean higher interest rates or outright rejection.
Time in business: Lenders typically want to see at least two years of operating history. Newer businesses can still get approved, but you'll need strong personal credit or collateral.
Revenue: They want a consistent, steady income that shows you can handle loan payments. If your income is all over the place, that's a red flag.
Debt-to-income ratio: How much debt are you already carrying? If you're maxed out on credit cards or other loans, lenders worry you can't take on more.
Cash flow: Do you have enough money coming in each month to cover your expenses plus a loan payment? If your cash flow is tight or unpredictable, lenders see risk.
Financials: Clean profit and loss statements, balance sheets, and tax returns. If your books are a mess or six months behind, lenders assume your business is, too.
Collateral: What can you put up if you can't repay the loan? Trucks, equipment, real estate, and basically anything with value that the lender can seize.
To improve your chances of getting approved, you must have a solid financial strategy that positions your business as a safe bet.
That means maintaining clean, accurate books year-round, tracking cash flow, and documenting profitability in a way that shows lenders where your money is coming from in a clear way.
When your financials tell a clear, confident story about your HVAC business running smoothly, your chances of approval are much higher.
Therapeutic Tax Solutions - We Help HVAC Contractors Get Loan-Ready
Often, HVAC contractors get rejected for business loans not because their business is failing, but because their financials don't tell the right story.
Lenders want clean books, consistent profitability, and predictable cash flow. If your records are messy or your margins are unclear, you look like a risk even if your business is solid.
At TTS, here's what we do:
✓ Clean, accurate financials: Weekly bookkeeping, monthly reconciliations, and organized records that lenders trust.
✓ Job costing and profitability tracking: We show lenders exactly where your money comes from and where it goes.
✓ Cash flow forecasting: We project your cash flow 12 months out so you know if you can handle loan payments, even during slow seasons. Plus, lenders appreciate businesses that plan ahead.
✓ Benchmarking against competitors: We compare your margins and financial health to industry standards. When you can prove your business is performing well compared to similar HVAC companies, lenders take notice.
✓ Proactive loan prep: We know what lenders look for, and we make sure your financials check every box before you apply for better approval odds and rates.
With us, 7- and 8-figure HVAC businesses get accurate bookkeeping, proactive tax planning, and financial advisory services that help you make smart decisions, including when and how to borrow.
Alternatives to HVAC Business Loans
Loans aren't the only way to fund your growth. Depending on your situation, these alternatives might make more sense:
Vendor financing: Some equipment suppliers offer payment plans. You buy the HVAC unit or diagnostic tool and pay it off over time, often with little or no interest.
Leasing: Instead of buying equipment outright, you lease it. Lower upfront costs, though you don't own it at the end. Good for equipment that needs frequent upgrades.
Personal savings or bootstrapping: Slower, but you avoid debt and interest payments. If you can afford to wait, this keeps your business debt-free.
Investors or partners: Bring in capital without taking on debt. You give up some ownership or profit share, but you're not stuck with monthly payments.
Government grants: These are rare, but worth researching. Some energy-efficient HVAC systems might qualify for grants or tax credits that can offset equipment costs.
Overall, alternatives to HVAC business loans might take longer or cost you equity, but they keep debt off your books.
FAQs
How Long Do You Have to Pay Back an SBA Loan?
Repayment terms for SBA loans depend on what you're using the money for. Equipment loans typically run 10 years, and working capital or general business loans also max out at 10 years, but in practice, they're often shorter than that.
Longer terms mean lower monthly payments, but you'll pay more interest over time. The trade-off is that extended repayment periods make it easier to manage cash flow.
Is It Hard to Get Approved for HVAC Financing?
Traditional bank loans and SBA loans are harder to get, especially if you don't have a good credit score. Equipment financing and online lenders are usually easier because they're willing to take on more risk (and charge higher rates for it).
If your books are organized, your profit margins are solid, and your cash flow is predictable, approval gets a lot easier.
What Makes You Rejected for a Loan?
Generally speaking, low credit score, messy financials, inconsistent revenue, too much existing debt, or not enough cash flow to cover payments. Lenders also reject applications when they can't see a clear path to profitability.
Your books must always back up what you're saying about your business. You might know you're profitable, but if your P&L doesn't show it clearly, the lender assumes you're not.
The Bottom Line
Business loans can help you grow faster, but only if you borrow smart and your financials can back up the application. Lenders want proof that your business is stable, profitable, and capable of handling debt.
Ready to get your financials loan-ready?
Therapeutic Tax Solutions helps HVAC contractors organize their books, track profitability, and prepare the documentation lenders want to see. Whether you're applying next month or next year, we'll make sure your numbers tell the right story.
Learn more about our services or get in touch!
