Landscaping funding: equipment and crews before spring, a gap after fall

Landscaping is one of the most seasonal businesses there is. In much of the country, the crews, trucks, mowers and materials all have to be ready before the first spring invoice, and revenue thins out after fall clean-ups. The funding that fits follows that curve. Funding that ignores it turns a good year into a hard winter.

The cash-flow shape of a landscaping company

• Spring ramp. Equipment servicing, new machines, materials, insurance renewals and hiring land before the season's revenue. Some companies bring in seasonal workers through the H-2B program, which lets employers hire temporary nonagricultural workers for needs such as seasonal or peakload work. Either way, payroll climbs before the receivables do.
• Contract income on terms. Residential customers may pay per visit or monthly. Commercial properties, HOAs and municipalities usually pay on invoice, weeks after the work.
• Fall peak, winter gap. Clean-ups and leaf removal bring a late rush; then, outside snow removal or warm climates, revenue drops while the truck and equipment payments keep coming.
• Equipment cycles. Mowers, trucks, trailers, skid steers and, increasingly, battery-powered kit wear out or get replaced in waves.

Your own month-by-month deposits show how deep the trough is. Know that number before you borrow.

Which funding fits, and which doesn't

Equipment financing suits landscaping because the machines secure the deal and last several seasons. The IRS also lets businesses elect a section 179 deduction instead of depreciation for certain property. Your accountant can say whether it applies to your purchase.

A line of credit is the best fit for the spring ramp: draw it as crews start, repay it as contracts pay, and let it sit unused in winter. A merchant cash advance is a weak fit: card sales are often a small share of income, and fixed daily payments don't stop when the grass does.

What it costs: a worked example

Say you finance $100,000 of mowers and trucks at 18% APR over 24 months, paid monthly.

• The payment is $4,992.41 a month.
• You repay $119,817.84 in total.
• The interest is $19,817.84.

Now look at the same $100,000 as a cash advance at a 1.30 factor over 6 months, paid daily: $130,000 back in 126 payments of about $1,031.75, or about 109% APR. Take it in September and a large part of those payments land in your slowest months. The borrowing calculator on this page shows what your deposits can realistically support.

Sterling's take: borrow when your statements look like summer, repay on a schedule that knows about winter.

What funders typically ask a landscaping company for

• Business bank statements, ideally a full year so the seasonal pattern is visible.
• Commercial contracts or a list of recurring customers.
• An accounts receivable aging report if you bill on terms.
• Proof of insurance and any required state or local licenses.
• For equipment: the dealer quote.
• A schedule of existing equipment loans and advances.

Our funding partner's programs suit companies trading 12 months or more with about $80K a month in deposits, an owner credit score of 600+ and no more than two advances or loans running. Smaller companies can still ask.

Red flags specific to landscaping

1. Applying in the trough. Funders size offers on recent deposits. Applying in January shows your worst months. Plan ahead and apply when your statements are strong.
2. Fixed payments that outlast the season. If repayment runs on fixed daily debits into winter, you're paying peak-season amounts on off-season income.
3. Being classed as construction. Heavy hardscape, grading or remodeling work may put you in a construction category that many funders, including our partner, treat differently. Describe your work accurately so the answer you get holds.

Before you sign

Sketch twelve months of expected deposits and lay the repayment over it. If any month goes negative, change the product or the term.