Financing For Electrician Businesses
Without electricians, there would be no lights, computers, televisions, or telephones plugged into our walls – these are all necessities in today’s technology driven society. An electrician is typically described as a tradesperson who installs and maintains electrical systems in a variety of settings, particularly in homes, businesses, and factories. The basic definition of what an electrician truly does is simplistic, when in reality being in the electrical industry is quite complicated. For most projects, an electrician is responsible for retrieving electricity from the source and supplying it to various parts of a building or house. To achieve this goal in a safe manner, meaning without endangering themselves or the public, an electrician must have solid working knowledge of the electric codes, as well as the ability to translate the electrical systems from blueprints into practice. Due to the high level of knowledge needed to be an electrician, almost all states require some form of licensing, as well as hands on experience through a formal apprenticeship. The amount of time and training an electrician accumulates during his or her apprenticeship varies anywhere from 250 hours of training to more than 1,000 hours of training! This has left most electrical companies in the industry searching for highly qualified electricians. Most electrician contractors believe that there are not enough experienced electricians in the field today; with rising demand in building development with the growing economy, many electrical companies are struggling to find adequate and skilled electricians.
The electrical industry is constantly evolving; the reasons for an electrician entering the field, as well as the types of media and trends that are important to stay aware of, are much different than when Baby Boomers were entering the electrical industry. The number of electricians from the Baby Boomer generation are also retiring at extremely high rates in the past few years, increasing the already high demand for skilled, qualified electricians who have been willing to undergo the extensive hands on training that electrician apprenticeships require. In addition to the growing gap for demand of highly trained and skilled electricians is the growing gap for entry level electricians. What this means is that with the rising demand in building development in the past few years, there are not even enough entry level electricians at job sites. These discouraging facts are leading to many electrical business owners at a loss for what to do to, however there has recently been an increase in younger generations wanting to enter into the electrician field. More than one-third of electricians have said that they are entering the field because they believe electrical work will always be in demand, and two-fifths of electricians are entering the electrical contracting field because they see an opportunity for job security. Many electrical business owners are paying their current workers very well due to this shortage of viable electrical contractors; this is leading to added financial stress for many electrical business owners today, which is why reviewing the different loan options available to an electrician business can help.
Electrician Industry Trends
In 2015, electricians were being paid an average of$24.94 per hour, and this average is only expected to continue to rise through 2016 and into 2017. For most industries, the average growth rate for an occupation is typically around 7 percent, but the electrician industry is expected to rise to 14 percent in the upcoming years! The electrical contracting industry is also one of the largest subcontracting industries in the United States today. This is incredibly promising for any electrical business owner, as well as people looking to enter the electrician industry. A majority of the revenue generated by electrician contracting companies is predominately from the installation, repair and maintenance of electrical power, wiring and related systems in buildings and homes across the construction market spectrum.
Since 2011, the total construction activity has continuously trended upward; this is expected to continue well into the upcoming years for the electrician industry, since the electrical industry is incredibly dependent on the growth of the construction industry. There has been a continuous increase in consumer spending across all industry markets since the 2008 financial crisis, but particularly in the construction and electrical contracting fields. So essentially, more consumer spending equates to more buildings, businesses, and houses being bought for remodeling, or being built. Over the second half of 2015, there were over 1 million housing starts, mainly in part thanks to the younger generations that are now first time home buyers. Many electricians are optimistic about what is in store for their electrical businesses in the near future, but that does not mean there are not emergency situations or just slow periods, especially with winter here, so being aware of the different loan and finance possibilities for an electrician will be important.
Electrician Financing Uses
- Payroll is the number one necessity for any business owner, however with the electrical contracting industry, employers are being forced to pay higher wages for quality workers. The lack of available and skilled workers in the electrician field has led to a drastic increase in demand for better pay, resulting in payroll costs that can be difficult to cover. There are many payroll loan options for electricians today to help cover those costs.
- Training, certification, and apprenticeships are vital for new electricians. Many electrical contracting companies are struggling finding qualified employees, so many electrician business owners have resorted to finding applicants that are willing to undergo the strenuous process of being trained and certified, especially if business owners are willing to cover the fees and costs associated with the training. However, these costs are not easily affordable for many business owners, so reviewing the different loan options for an electrical contracting company can help.
- Equipment is a mandatory expense in the electrical field, however having top of the line equipment for all of the electricians in a business can be expensive, especially when having to replace equipment unexpectedly. Looking into equipment financing options for your electrical contracting business is always a possibility.
- Cash flow can be hard to maintain if an electrician business is new, small, or having an off season – but this does not mean that your business needs to suffer thanks to the variety of loans offered to electrical businesses today.
- Expansion is always an option for any electrician company that is doing well in this booming market. Many of the current trends and statistics for the growing electrician industry are allowing many electrical companies to contemplate this venture, so having an option to help finance an electrical business expansion can be an asset.
Types of Electrical Business Loans
|Bank||6-10%||3-7 years||14-30 days|
|SBA||6-10%||3-7 years||10-30 days|
|Line of Credit||5-15%||1 – 3 years||7-30 days|
|Alternative||6-25%||1-5 years||5-7 days|
|Cash Advance||1.16-1.55||3-24 months||1-3 days|
|Invoice Finance||1-2% weekly||1 – 90 days||1-3 days|
Electrician Bank Loans
If you own an electrical contracting company, or electrician business and you have good credit and established profitability, true bank financing is the best option. Bank lenders have financing options that can cover just about any business need, while offering the best rates and most desirable terms.
- Rates: 4-10%
- Terms: 1-5 years
SBA Electrician Loans
SBA financing is the next best option after bank loans. SBA loans offer rates and terms that are very similar to traditional financing, because the loans are actually provided by traditional lenders, but the government agrees to cover some of the lender’s losses should the electrical company default on their loan
- Rates: 6-8%
- Terms: 7-25 years
Alternative Electrician Business Loans
One of the fastest growing types of business financing are alternative loans for small businesses. Alternative financing provides small businesses with quick and affordable financing (although not as affordable as traditional lending) without the strict credit and documentation requirements.
- Rates: 9-16%
- Terms: 1-5 years
Equipment Leasing For Electricians
If you own an electrician business and need to obtain machinery or equipment to run your day-to-day operations, an option may be to lease the equipment. Equipment leasing allows you to obtain equipment without having to pay the full-cost of the equipment upfront.
- Rates: 6-20%
- Terms: 1-10 years
Electrician Cash Advance
If you own an electrician company that has bad credit, or is in desperate need of financing immediately, a cash advance may be the best option. Cash advances use your business cash-flow as the basis for funding, by having the lender buy a percentage of your future sales at a discount in return for upfront cash.
- Rates: 16-100%
- Terms: 4 months – 2 years