Lawn mowing service business loans are readily available to most entrepreneurs looking to provide this service the general public. The vast majority of the funds that are used for a lawn mowing service are specific for trucks, trailers, lawnmowers, and related equipment. The gross margins generated from these services are almost always able to support a debt obligation given that this is a service-based business.
In most instances, a lawn mowing service typically carries gross margins ranging anywhere from 60% to 95% depending on a few factors. If labor is considered as part of the cost of goods sold then this may decrease the gross margins somewhat also the fact that a business may accept credit cards as a form of payment may also incur a higher gross margin cost. However, overall these businesses are extremely profitable and are almost always able to produce revenues in any economic climate. This is especially true in both your area or areas where people tend to outsource lawn mowing in one’s landscaping contracting to a third party. Generally speaking, the startup costs that are associated with the new lawn mowing service ranging where from $30,000 to $100,000 depending on the area and initial scope and scale of the business.
Banks and lenders are almost always willing to provide the necessary capital for these types of business, again, given the very large tangible asset base associated with these companies. Foremost, a lender is going to want to see what equipment is going to be purchased with the money that is being borrowed. This includes providing a list of inventory including the make and model of trucks they purchased, trailers, lawn mowing equipment, as well as any other type of specialty equipment that would be used in the normal process of landscape contracting and lawn mowing. A business plan specific for a lawn mowing service should be included as well that showcases the profit and loss statement, cash flow analysis, balance sheet, breakeven analysis, and business ratios page that features information normally associated with a lawn mowing service. Most importantly, a special focus should be paid to the tangible assets that are being purchased if the entrepreneur is seeking a lawn mowing service business loan.
Almost all lenders are going to want to see that the founder is making a 10% to 20% capital injection into the business in order to ensure that they can finance the ongoing operating expenses of the business for at least one year. Most banks and lenders prefer that the owner make the capital injection as a relates to working capital given that they want to see that the vast majority of the loan proceeds are used for tangible asset purchases. This is going to be one of the ongoing things that we discussed throughout this website as it relates to ensuring that a bank loan is almost nearly fully collateralized by hard assets. This is true even among service businesses like lawn mowing companies.
As part of the business loan package, most financial institutions are going to require that at least two years of tax returns are provided. This is true even if the business is a startup in which case the bank is going to want to see tax returns from the owner. If the proceeds of the lawnmowing service business loans are to be used for acquisition, then the financial institution will most likely want to see the tax returns of the current business for at least two years back. As such, it is important that a certified public accountant is hired so that these pieces of documentation can be properly provided to the bank especially in the case of a business acquisition.
In northern areas of the country, it should be made clear within any documentation that is presented to a bank that lawnmowing services are a seasonal business. This creates a little bit of additional complexity given that the owner is going to need to show how the business will make repayments of principal and interest from the business loan when the business is not generating revenue. This is generally not an issue in southeastern and southwestern based states given that the services are in demand on a year-round basis. A cash flow analysis that clearly showcases the first years expenditures should be included as well as it will provide the loan officer or the loan committee of an understanding of how the loan will be repaid. It is very important, in fact it is the most important fact within of receiving a lawnmowing service business loan, to clearly showcase to a financial institution how the credit facility will be paid back on a monthly basis. A loan amortization table should be included with any documentation that showcases the anticipated term and the anticipated interest rate that will be received by the business owner.
Very little is expected to change as a relates to lawn mowing services, and as such banks are very keen to provide a significant amount of ongoing capital support to these companies that they are able to generate revenues in any economic climate. Once a lawn mowing services established and per generating a substantial amount of profit – it becomes even easier to get financing as a significant portion of these proceeds will be used for the ongoing expansion of the business. While competitive threats are somewhat of an issue regarding these businesses given the very low barriers to entry – once an entrepreneur establishes their business as a high quality and well-known provider of landscape contracting and lawn mowing services they are usually able to remain profitable at all times.