It’s been a wild twelve months. While we all hope 2021 is not a repeat of the previous year, businesses still face significant challenges. However, one thing that 2020 taught is that it’s a great time to be in the HVAC service business. We’ve known since the 2008 economic downturn that it was a recession-resistant industry, and thankfully, 2020 was a banner year for heating and air company owners across the country.
As people spent more time at home and turned them into workspaces, they wanted and needed to be comfortable. It made maintenance agreements easier to sell, and government stimulus money made new HVAC unit purchase decisions easier to make. On top of that, our industry was deemed “essential” so forced government shutdowns didn’t interrupt business operations.
Still, for millions of other small businesses in America, they’re struggling. With uncertainty lingering, vaccines slowly rolling out, and the economy teetering, the federal government doesn’t want to leave any assets sitting on the sideline.
That’s why they recently enabled a second round of business loan assistance through the Small Business Administration (SBA). As a result, we are seeing some of the most favorable conditions to expand into HVAC in history.
The SBA has pulled out all the stops and wants to spur business continuation and entrepreneurial expansion as soon as possible.
Here are the details.
No SBA guarantee fee for the borrower
SBA collects loan guarantee fees so entrepreneurs (not the United States taxpayers) bear much of the cost of funding financial assistance programs. But in this latest round, they suspended the fee requirement. It’s a big deal, and it means more money in business owners’ pockets. For example, a loan of $1 million would normally come with a fee of $35,000. This is a fee you no longer have to pay.
Up to 90% guarantee on SBA 7a loans.
SBA will guarantee up to 90% of a loan up to $3,750,000. This means that banks are incentivized to loan because repayment is backed by the full strength of the U.S. Government. Financing up to $5 million comes with a 75% guarantee.
SBA express maximum increased to $1MM
Loans up to $350K receive a 75% guarantee until 10/1/21. Express loans above $350K will have a 50% guarantee and are still subject to SBA rules that apply to loans over $350K (full underwriting, collateral, and life insurance rules still apply).
6 months of principal and interest paid for by the SBA, up to $9,000 per month.
Would you like the U.S. government to pay your principal and interest loan for up to 6 months? Of course you would! What a fantastic opportunity to get up and running in your new HVAC business without looming debt service.
With all these fantastic announcements, it does come with a catch. The program is only available until 10/1/2021, or until the money is exhausted. We don’t know when that could be, but program dollars will likely run dry much sooner than October.
If you’re waiting until the next round of funding, you may be out of luck. Reinstating a program like this requires an act of Congress. The banking friends I work closely with are saying this is probably the last round, considering millions of vaccines are being administered right now.
Hope is indeed on the way, but fortune favors the bold, and the time to act is now. I think we will look back and reflect on how these few months were this generation’s best opportunity to expand into the HVAC business.