Starting a handyman business can be a rewarding and profitable venture. However, even with lower upfront costs than many other businesses, you'll still need to cover expenses like tools, a vehicle, insurance, and marketing.
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Selecting suitable financing options is key to starting a local, service-based business without overextending its finances.
Here are five realistic and accessible financing options to get your handyman business.
Why Financing Matters for a Handyman Business
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Though the initial investment for a handyman business may be lower than in other industries, startup costs still add up.
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A reliable work vehicle, quality tools, insurance, and initial marketing can require a few thousand dollars.
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A well-chosen financing approach ensures you have the funds to start effectively while maintaining financial flexibility as you grow.
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Essential Startup Costs for a Handyman Business
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To determine your financing needs, consider these primary costs:
Tools and Equipment: High-quality tools are essential and typically cost between $1,000 and $5,000, depending on the range of services offered.
Vehicle Purchase and Maintenance: A reliable truck or van is often necessary, costing a used vehicle around $5,000 to $15,000. Include gas, maintenance, and insurance in your budgeting.
Licensing and Permits: Business licensing costs vary by location but generally range from $50 to $500.
Insurance: General liability insurance is crucial for protection and client trust. It costs between $500 and $1,500 per year.
Marketing and Branding: Developing a professional website, local advertising, and branded materials can cost between $500 and $2,000.
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5 Realistic Financing Options for a Handyman Business
Now that you know what you'll need to cover, here's a look at five realistic financing options to help you start your handyman business.
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1. Personal Savings
Personal savings is one of the most straightforward ways to finance a handyman's business. This approach can be particularly practical for smaller-scale startup costs.
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Pros:
No debt or interest payments
Simple and immediate access to funds
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Cons:
Requires you to have sufficient savings
Personal financial risk if business growth is slow
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If your startup needs are relatively low and manageable, personal savings can help you avoid debt and the burden of monthly payments.
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You maintain complete control over your business without external financial obligations by using a portion of your funds.
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2. Business Credit Cards
Business credit cards can be a flexible option for handling smaller, ongoing expenses in your handyman business. Many business credit cards offer perks like cashback, rewards, and expense tracking, which are helpful as you get started.
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Pros:
Access to funds as needed
Potential rewards or cashback on business expenses
Builds business credit history
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Cons:
High interest if balances aren't paid off monthly
Requires good personal credit for approval
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Business credit cards are ideal for handling small costs like fuel, supplies, or minor tool purchases. However, they must be used responsibly.
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Paying off your monthly balance helps you avoid high-interest charges and builds a good credit record for your business.
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3. Equipment Financing
Equipment financing can be an excellent option if your primary costs are related to tools and a vehicle. Many lenders provide loans specifically for purchasing equipment, and the equipment itself is collateral, often making it easier to qualify.
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Pros:
It allows you to acquire high-quality tools and a reliable vehicle
Often easier to qualify for since equipment serves as collateral
Fixed monthly payments simplify budgeting
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Cons:
Financing is restricted to equipment purchases only
Defaulting could result in loss of financed equipment
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If you need a larger initial investment for tools and a vehicle, equipment financing allows you to start without a large upfront payment. This option lets you focus your budget on other business needs while acquiring key assets.
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4. Peer-to-Peer (P2P) LendingÂ
Peer-to-peer (P2P) lending platforms like LendingClub and Prosper connect borrowers with individual lenders, offering an alternative to traditional loans. P2P lending is often more flexible, especially for smaller manageable loan amounts for a handyman business.
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Pros:
Accessible to small businesses without established credit
Competitive interest rates and flexible terms
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Cons:
Loan amounts may be limited for new borrowers
Interest rates can be higher if personal credit is less than ideal
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P2P lending is helpful for moderate funding needs like insurance, marketing, or smaller equipment purchases. It can be an effective solution if you have fair credit but want to avoid traditional banks. Additionally, with P2P loans, you can often receive funds faster than traditional lending processes.
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5. Small Business Loans from Credit Unions or Community Banks
For new local businesses, community banks and credit unions are often more willing to offer small business loans than larger banks. They are generally more community-oriented and flexible, with a deeper understanding of local market needs.
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Pros:
Flexible loan options tailored for local businesses
Lower interest rates than credit cards or P2P loans
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Cons:
Requires strong credit and possibly some collateral
The approval process may be slower than other methods
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Community banks and credit unions may provide small loans with reasonable terms, especially if you have good credit and a solid business plan. Establishing a relationship with a community bank can also benefit you in the long term as your business grows.
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Choosing the Right Financing Strategy for Your Handyman Business
Here are some guidelines to help you choose the best financing option(s) based on your needs:
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1. For Smaller Startup Costs: If your handyman business startup costs are relatively low and manageable, consider using personal savings or a business credit card for flexibility.
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2. For Equipment Purchases: If your main expenses are tools or a vehicle, equipment financing is specifically designed for these purchases, allowing you to avoid using all your savings upfront.
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3. For Moderate Cash Flow Needs: If you need funds for operating costs like insurance or marketing, consider P2P lending or a community bank loan. Both offer manageable loan amounts with fixed repayment terms.
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4. For Establishing Credit: Responsible use of a business credit card helps build a business credit history, making it easier to access additional financing as your business grows.
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Tips for Managing Your Finances After Securing Funding
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Once you have secured financing, managing those funds effectively is crucial to keep your business financially healthy. Here are some practical tips:
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Separate Personal and Business Finances: Open a dedicated business bank account to manage cash flow and track expenses. This separation also simplifies tax preparation.
Create a Budget and Track Expenses: Use budgeting software to monitor expenses and ensure funds are used strategically. Accounting tools like QuickBooks or FreshBooks can help track income and expenses effectively.
Invoice Promptly: In a service-based business, timely invoicing is essential for steady cash flow. To encourage prompt transactions, consider offering clients small discounts for early payments.
Plan for Unexpected Costs: Set aside part of your earnings for emergency expenses, such as vehicle repairs or replacement tools. An emergency fund provides peace of mind and ensures business continuity.
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Frequently Asked Questions (FAQs)
1. How much money do I need to start a handyman business?
The startup costs for a handyman business typically range from $3,000 to $10,000, depending on whether you need to purchase a vehicle, high-quality tools, and insurance and marketing expenses. Your initial costs may be lower if you own tools and a vehicle.
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2. Is a business loan necessary to start a handyman business?
Not necessarily. Many handymen start small and use personal savings or a business credit card to cover initial costs. A loan might be helpful if you need more extensive equipment or want to purchase a reliable vehicle. Starting with personal savings and gradually expanding through manageable financing options is often a practical approach.
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3. What are the most critical startup expenses for a handyman business?
Essential expenses include quality tools, a reliable vehicle, insurance, and initial marketing. Insurance is essential as it protects your business from liability, and tools are the core assets needed to complete jobs. Marketing is also essential for attracting clients, especially if you're new to the business.
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4. Can I use a personal credit card for business expenses?
Yes, but it's generally better to open a business credit card to separate personal and business expenses. This separation simplifies bookkeeping, helps build business credit, and makes tax preparation easier.
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5. What are the best financing options for purchasing tools and equipment?
Equipment financing is specifically designed for purchasing tools and equipment, and the equipment itself typically serves as collateral. Alternatively, you could use a business credit card or personal savings if the tools are affordable enough without requiring a dedicated loan.
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Final Thoughts
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Financing a handyman business can be simple and easy if you choose the suitable options.
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Starting with accessible financing solutions like personal savings, business credit cards, equipment financing, peer-to-peer lending, and community bank loans enables you to start small, build a solid foundation, and manage costs effectively.
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By selecting realistic financing methods, you can focus on delivering quality service and growing your business with a manageable financial commitment.
Related Articles in this Series
How Much Does It Cost to Start a Handyman Business?
How Much Money Can I Make Starting a Handyman Business?
How to Finance a Handyman Business: 5 Realistic Options to Get Started
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