HVAC business funding, before the first heat wave.

The HVAC year: two peaks and two shoulders

Few businesses ride the weather as directly as heating and cooling. Cooling demand peaks in summer, heating demand in winter, and one heat wave or cold snap can fill a week's schedule in a day. Spring and fall are the shoulder seasons: tune-ups, maintenance visits and quoting replacements, with much less emergency work.

Where you operate changes the shape. A Sun Belt contractor may run hot from May to October and barely notice winter; a contractor in the upper Midwest may do more furnace and boiler work than air conditioning. Either way, deposits can swing widely between your best and slowest months, and an underwriter will want to know which part of the curve your recent statements show.

Where an HVAC company's money comes from

• Service calls and repairs, usually paid by card in the field or at the office when the job is done.
• Residential replacements. Larger tickets paid by card, check or through a consumer financing program, where the finance company pays you a lump sum, net of a fee, after the install.
• Maintenance agreements. Monthly or annual plan billing that brings in steady recurring revenue and fills the shoulder seasons with work.
• Commercial and new construction. Invoiced work on net terms, sometimes progress-billed with retainage held until completion, which arrives as fewer, larger checks or ACH payments.

A mostly residential shop shows many deposits a week. A commercial-heavy contractor shows fewer, bigger ones, so the underwriter will also look at your receivables through an A/R aging report.

Why contractors look for funding in the spring and fall

The preseason is when cash is most stretched and most valuable:

• Equipment on the shelf. Condensers, air handlers, heat pumps and furnaces bought ahead of demand, before distributor stock runs short in the first hot week. Equipment prices have also risen with the industry's move to newer refrigerants, so stocking a warehouse takes more cash than it used to.
• Technicians. Hiring and training installers in April means paying them for weeks before the peak pays for them.
• Trucks and tools. Outfitting another service van, recovery machines, vacuum pumps and gauges.
• Marketing. Tune-up campaigns that fill the schedule and generate replacement leads before the season.

Should an HVAC company choose daily or weekly payments?

An advance taken in April is paid through the summer peak, but also through the fall shoulder. Daily payments that feel trivial in July can pinch in October. Before you sign, check the payment against your slowest recent month, not your average.

Weekly payments are available in many cases and suit contractors whose big deposits arrive a few times a week. A smaller advance taken closer to the season shortens the stretch you pay through the slow months. And if a cool summer cuts your revenue, you can ask for a reconciliation so payments reflect what's coming in.

What an underwriter looks at for an HVAC contractor

• Your last three months of statements plus month-to-date, and where those months fall in your season
• The mix of residential and commercial work, and an A/R aging report if you invoice on terms
• Deposits from consumer financing companies, which arrive as lump sums after installs
• Existing truck and equipment payments, plus any advances already in place
• No more than 5 negative-balance days a month on average, which matters most in the shoulder months

When an HVAC contractor needs a different product

• A new service truck. A vehicle you'll drive for years is cheaper on equipment or vehicle financing.
• A big commercial job on net-60. If the gap is one large invoice, invoice factoring may fit better.
• Carrying every winter. If the off-season gap is predictable every year, a bank line of credit is the cheaper standing cushion, if you qualify.

Frequently asked questions