HVAC and trade contracting is a cash-hungry business: a single outfitted service van can cost $60,000 or more, a commercial rooftop unit ties up tens of thousands in materials before you invoice, and payroll comes due every two weeks whether your GC has paid you or not. The good news is that lenders like contractors — you own hard assets and bill creditworthy customers. This guide covers the three financing problems every HVAC, plumbing, and electrical shop eventually faces, and which tool actually fits each one.
The three cash flow problems every trade contractor hits
Most HVAC, plumbing, and electrical businesses run into the same three squeezes, usually in this order:
- Asset purchases. Vans, box trucks, refrigerant recovery machines, pipe threaders, sheet metal brakes, trenchers. Big-ticket, long-lived, and essential to taking on more work.
- The billing gap. On residential service you often get paid same-day. On commercial and new-construction work, you invoice against progress, wait 30–90 days, and may have 5–10% retainage held until project completion.
- Payroll and seasonality. Licensed techs are expensive and scarce — you can't lay them off every shoulder season and hire them back in July. Payroll runs regardless of when receivables land.
Each problem has a different right answer. Using the wrong tool — say, an expensive short-term advance to buy a truck — is how contractors end up with payments that outlast the benefit.
Financing service vans, trucks, and equipment
Equipment financing is purpose-built for asset purchases: the lender finances the van or machine, takes a lien on that specific asset, and you repay over a fixed term. Because the collateral is built in, approval is often possible with credit scores around 600–620 and as little as one year in business — sometimes less with a down payment.
Typical structures for contractors:
| Asset | Typical term | Typical advance | Notes |
|---|---|---|---|
| New service van/truck | 48–72 months | 90–100% of price | Upfitting (shelving, racks) can often be rolled in |
| Used van/truck | 24–60 months | 80–90% | Age/mileage caps apply; rates run higher |
| Heavy equipment (trencher, lift, crane) | 36–72 months | 80–100% | May require equipment inspection |
| Tools & diagnostic gear | 24–48 months | Often bundled | Small-ticket programs exist for $10,000–$50,000 packages |
A few practical points:
- Roll in the upfit. A bare cargo van is not a service van. Many lenders will finance the vehicle plus shelving, ladder racks, inverters, and wraps in one contract — ask before you sign.
- Section 179 and depreciation. Financed equipment placed in service may qualify for accelerated expensing, which can meaningfully offset your first year of payments. Confirm specifics with your accountant.
- Lease vs. buy. An Equipment Lease lowers monthly payments and suits fast-turnover technology; financing to own usually wins for vehicles you'll run 150,000+ miles. See our full equipment financing guide for the breakdown.
Bridging the progress-billing gap
Commercial and new-construction work pays well but pays slowly. A typical sequence: you complete a rough-in phase, submit a pay application, the GC reviews it, the owner funds it, and 45–75 days later you get paid — minus 5–10% retainage held until final completion. Meanwhile you've already paid for equipment, materials, and labor.
Two tools fit this gap:
Invoice factoring. You sell approved invoices to a factoring company, which advances typically 70–90% of face value (the Advance Rate) within 24–48 hours and remits the balance minus a Factoring Fee — often 1–4% per 30 days — when your customer pays. Approval depends mostly on your customers' credit, so factoring works even for newer shops or owners with bruised personal credit. Construction-adjacent factoring is specialized because of pay-when-paid clauses and retainage, so it pays to work with factors who understand contractor billing. Our invoice factoring guide covers recourse vs. non-recourse structures in depth.
A business line of credit. If your receivables are reliable and you just need to smooth timing, a revolving line is usually cheaper than factoring. You draw what you need, pay interest only on the outstanding balance, and repay as invoices clear.
| Invoice factoring | Line of credit | |
|---|---|---|
| Approval based on | Your customers' credit | Your revenue and credit |
| Speed after setup | 24–48 hours per invoice | Same-day draws |
| Cost | ~1–4% per 30 days per invoice | Interest on drawn balance only |
| Scales with | Your invoice volume | Your approved limit |
| Best for | Slow-paying GC/commercial work, newer businesses | Established shops with steady deposits |
Covering payroll and surviving the shoulder seasons
HVAC demand spikes in extreme weather and sags in spring and fall; plumbing and electrical have their own rhythms tied to construction cycles. The mistake many contractors make is taking a lump-sum term loan for what is really a recurring, short-duration need — then paying interest on the full balance twelve months a year.
A business line of credit fits seasonality better: draw $30,000 in April to carry payroll, repay it out of June and July revenue, and pay interest only for the weeks the money was out. Lines for contractors typically range from $25,000 to $250,000+ depending on revenue, with online lenders often approving in days. Our line of credit explainer walks through draw periods, repayment mechanics, and typical costs.
When a term loan does make sense: one-time, defined investments — buying out a partner, opening a second location, or consolidating expensive short-term debt into a single lower payment.
What lenders look for in a contractor application
Underwriters evaluate trade contractors on a fairly predictable checklist:
- Time in business: 2+ years opens most doors; 6–12 months still works for equipment financing and factoring.
- Revenue and deposits: 3–6 months of business bank statements. Lenders look at average monthly deposits, NSF incidents, and daily balances.
- Credit: Personal FICO matters most under roughly $500,000 in annual revenue. 600+ gets you options; 680+ gets you better pricing.
- Licensing and insurance: Active trade licenses, general liability, and (for vehicle deals) commercial auto coverage.
- Customer concentration: If one GC is 60% of your revenue, expect questions — factors especially watch Concentration risk.
- Existing liens: A prior lender's UCC Lien (UCC-1 Filing) can complicate new financing. Know what's filed against your business before you apply.
Having a clean Profit & Loss Statement (P&L), a current Debt Schedule, and recent tax returns ready can cut approval time roughly in half. Our document checklist covers exactly what to gather.
Matching the financing to the job: quick reference
| Situation | Best-fit financing | Why |
|---|---|---|
| Adding a second (or fifth) service van | Equipment financing | Asset is the collateral; fixed payment matches asset life |
| Buying rooftop units/materials for a big commercial job | Line of credit or PO financing | Short-duration need; repay when the job funds |
| GC pays in 60–90 days, payroll is weekly | Invoice factoring | Converts receivables to cash in 24–48 hours |
| Slow spring/fall months | Line of credit | Draw and repay; pay interest only when drawn |
| Buying your shop or a warehouse | SBA 504 or commercial real estate loan | Long terms, low down payments for owner-occupied property |
| Acquiring a competitor's book of business | SBA 7(a) or term loan | Longer amortization matches a long-term investment |
How the marketplace approach helps contractors
Equipment lenders, factors, and line-of-credit providers all price contractor risk differently — one lender's decline is another's approval, and rate spreads between offers on the same deal can be several percentage points. EQ Funding is a financing marketplace, not a lender: you submit one application, and it reaches a network of lenders across the US and Canada who compete to fund your business. You compare side-by-side offers on rate, term, and structure — and the lenders, not EQ, make every approval decision. For a shop that needs a van financed before peak season or payroll covered before a pay app clears, competition and speed both matter.