Financing Lawn Business

There are two ways of financing a lawn business: debt and equity.

Debt financing means borrowing money that is to be repaid over a period of time, usually with interest.

Equity financing is an exchange of money for a share of business ownership. The downside is that you give up some of the decision-making and the potential for profits. Therefore, since you are likely to be starting off small, use debt financing.

Here is a guide to financing a lawn business WITHOUT incurring a large debt or sharing equity ownership.

1. Lawn Accounts - Work off the Purchase.

  • The quickest way to get your foot in the door is to buy some accounts. Most sellers ask for 1 to 2 months maintenance per account. When you work it off, the transition becomes smoother for you, the seller, and the lawn customer for several reasons.

    1. The Buyer. You will become familiar with the new properties and the new customers. You will reserve the right to back out of the deal if you see any landmines. Consider it a test run without the financial risk.
    2. The Customer. The Customer will think that you work for the Seller and will pay the Seller directly for the work you did. The Customer is only told about you taking over the account AFTER the agreed time period. The Customer will be more willing to accept you taking over their account when they know that you have already been maintaining it for the past month or two. They would be more resistant if they were told a stranger would be taking over.
    3. The Seller. It is in the Seller’s best interest to provide any guidance you may need during that transition time period. If the transition is not going to work, the Seller wants to know early on before they lose the customer entirely. If a Customer doesn’t accept the transition, the Seller can compensate the Buyer with another account, a piece of equipment, etc.

  • Side Note: Over the years, I’ve sold off hundreds of accounts this way. It has always been easier to find someone willing to work off the accounts than someone who can come up with the cash. However, working off the purchase of trucks and equipment does not go as smoothly. They require maintenance and repairs, which requires one party to pay for it. Each party will inevitably feel the other should be responsible.

2. Equipment – Finance through Credit.

  • You buy on credit, collect money that your clients owe you, and use it to pay your bills.
  • Unless you are mechanically inclined, buy NEW equipment that comes with a warrantee. Repair bills on used equipment add up fast and often negate any good deal on the initial price.
  • Do not skimp on equipment because it is the backbone of your operation. Your business will be stopped dead in its tracks while you wait for your equipment to get out of the repair shop.

3. Vehicle – Loans.

  • You should have no problem financing a vehicle as long as your personal credit is ok. Banks are more lenient with lending money for vehicles because they can repossess it if you get behind in your payments.
  • Buying is a better option than leasing. Leasing costs more in the long run, but you can usually take possession with very little money down.
  • Do NOT buy a brand new vehicle. This is the fastest way to dig yourself into a financial hole. The second you drive off the dealer lot, the value drops substantially drops. You want it to retain some resale value when you start making more money and want to upgrade. Remember you are in business to make money, not to throw it away on a new truck.
  • Have the used vehicle checked out by a mechanic before purchasing.
  • If you can use a pickup as a personal and work vehicle, even better. One less insurance policy to pay for.

4. Operating Costs (Debt).

  • You will still need some money to cover operating expenses like insurance, gasoline, workers, repairs, supplies, and advertising. There are tons of ways to raise money painlessly...
    1. Credit Cards. Easy to get, but beware of high interest.
    2. Bank Loan. Banks will likely require a business plan. If you aren’t good at writing a one, buy one off the internet.
    3. Family or Friends. Beware of your relationship ending if you can’t pay it back.
    4. Refinance Home. If you own one, take out a second mortgage. Ask your mortgage broker for more options.
    5. Sell Personal Assets. Stocks, a boat, a motorcycle, etc. Look in your attic for anything you can sell on Ebay.

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