How to Finance an Office Cleaning Business

Starting an office cleaning business is relatively easy and inexpensive. The cost of supplies is fairly small and most entrepreneurs do the work themselves, at least initially.

However, running and growing an office cleaning company is a different story. There is a lot of competition out there, so you must constantly sell your services. Also, most commercial clients tend to pay invoices in 30 to 60 days. This delay can create cash flow problems for small companies that can’t afford to wait for payment. These problems affect your ability to stay in business and grow.

The simplest way to solve these cash flow problems is to ask your clients to pay sooner. Some may agree, especially if you offer them an early payment discount. However, if your clients do not agree to pay sooner, you need to get business financing. This article describes three ways to finance your growing office cleaning business.

Option #1: Lending networks

Peer-to-peer lending networks like Prosper and Lending Club have gained popularity in recent years as a way for entrepreneurs to get financing. These services act as intermediaries between individuals that have money to lend and entrepreneurs that need a small loan.

By the way, these services don’t provide business loans, per se. Instead they offer personal loans that can be used for business expenses.

Lending networks pose a few important challenges. The first challenge is that your personal credit matters for this transaction. Getting business financing if you have bad credit is difficult – if not impossible. The second challenge is that there is a limit to how much you can borrow. Often, this amount  won’t be enough – especially if your office cleaning business is growing rapidly.

Option #2: The Small Business Administration (SBA)

The SBA’s Microlending program provides up to $35,000 (the amount varies) of business financing to individuals looking to start and run a business. These highly recommended Microloan programs are available to business owners who have less than ideal credit and also come with bundled with invaluable business counseling sessions.

The only drawback of Microloans is that there is a limit to how much you can borrow. As with peer-to-peer lending, the Microloan limit is about $35,000. Companies that need to borrow more need to use the SBA’s 7A program, which has more difficult qualification requirements and longer waiting times.

Option #3: Factor your invoices

As mentioned earlier, one of the main financial challenges of running an office cleaning company is that commercial and industrial clients pay invoices on net-30 to net-60 day terms. This payment delay creates a problem because many entrepreneurs cannot afford to wait this long for payment. They need money sooner to pay employees and buy cleaning supplies.

You can solve this problem by factoring your invoices. Factoring allows you to finance slow-paying invoices, which gives you immediate funds. You can use these funds to pay your business expenses, while the finance company waits for your commercial clients to pay on their usual schedule.

How does factoring work?

Transactions are fairly simple. The factor finances your invoices in two payments: the advance and the rebate. Your office cleaning company gets the advance – about 80% of the invoice – as soon as you send the invoice to your client.

The remaining 20% – the rebate – is deposited to your account once your client pays the invoice in full, on their regular schedule. The finance fee is deducted from the rebate. For more information about factoring, read this article.

Advantages for your office cleaning business

Working with a factoring company can have many benefits for your business. The most important benefits are:

  • Your cash flow improves quickly
  • Your line is flexible and grows with your sales
  • Programs have quick approval times
  • Factoring is easier to get than a business loan

Are you looking for financing?

We can provide factoring programs with high advances at low rates. For more information, get an online quote or call us toll-free at (877) 300 3258.