How to Finance Your Spray Foam Business
Table of Contents
Understanding the Importance of Financing for Your Spray Foam Business
Getting into the spray foam insulation business isn’t the most expensive decision you could make, but when you consider start-up costs like equipment, insurance, materials, fuel, storage, parts, other tools, marketing, licensing and a safety net of six months operating & labor costs, cash flow is critical. On top of all that, there’s no telling how long it can take to get paid on your first projects. All things considered, financing provides additional cash flow that’s vital for getting your spray foam business up and running.
Searching for the ideal financing partner? Check out IDI’s financing options designed to help get your business off the ground and working as soon as possible.
Before you decide how to finance your business, do your research. Finding the best rates and terms goes a long way towards reducing stress levels and the amount of time it takes to pay back your loan.
Initial Spray Foam Business Start-Up Costs
When considering how much you want to finance versus paying out-of-pocket, it’s important to remember that it isn’t just foam and application equipment that you need to fund. Starting costs for a spray foam insulation business can include:
- A functional, easy-to-use website
- Marketing services and materials
- Insurance
- Certification and training
- Licensing
- Space rental
- Six months operating capital
- Labor
- Contractor Insulation
- Bidding Software (BIDIT)
It is possible that not all of these costs will apply to you — you may have the storage space you need, or maybe you have plenty of experience designing business websites — but be realistic! Everything you do yourself may save you money, but it pulls you away from growing the overall business. Also, don’t assume you can do all of the jobs coming in yourself and inadvertently leave clients unhappy. Bad reviews can tank your business before you get it off the ground.
Take advantage of your resources! IDI offers the best training courses on all things insulation, often including certification testing options. Taking the time and budgeting for expert spray foam and insulation training can be some of the best ROI for your spray foam business adventure.
Choosing Your Spray Foam Insulation Equipment
Before you start looking at financing requirements for your new spray foam business, make sure you know what kind of equipment you need for the projects you will be doing. Below are some of the bigger ticket equipment that often requires financing. For a more in-depth list of what will best fit your business, check out IDI’s article on selecting spray foam equipment.
Depending on the size you choose, spray foam rigs allow you to complete spray foam installations faster and more efficiently. Rigs come in a variety of sizes and configurations, including fully custom rigs, allowing you to choose the best fit for the work you do.
Average cost: Variable depending on size and equipment requirements. A general range of $80,000 – $150,000. Low-cost rigs are not recommended, as they are difficult to keep running and acquiring parts and services can be a challenge.
IDI has a wide variety of spray foam rig options available, check out our selection today to find one that will fit your business needs.
Proportioners are the main chemical processing equipment. They heat, pressurize, and deliver your chemical at a 1:1 ratio. Answering questions on your specific market, climate zone, and volume expectancy helps determine which one is right for you. IDI has experts that assist in this process every day.
Proportioner Package Average cost: $40,000
Make sure you’re spraying the best foam possible by buying a high-quality proportioner from IDI.
There are many different types of spray foam guns on the market. Choosing the right one is crucial. Understanding the differences between them can help in determining which one is right for you, and maximize your efficiency once you’re out in the field.
Average cost: $2,500 – $5,000
Check out IDI’s selection of spray foam guns to make sure you’re getting top-quality equipment from a trusted leading brand.
Safety both on and off the job site is the top priority. Whether you are spraying, prepping or cleaning up, there are certain PPE requirements for each job. Do you need to be on supplied air, or simply an air purifying respirator? IDI can help answer those questions.
Average cost: $3,500 for large ticket items like air filtration panels, down to around $20-50 for items like respiratory masks.
Keep your team safe on the job with safety equipment from IDI.
Generator requirements vary depending on the amount of electricity needed to safely and correctly power your equipment. The size of the proportioner package, heat, AC and auxiliary outlets all come into play when it comes to the generator. IDI’s team will help determine what the kilowatt demand is to ensure we size the generator correctly to power all of your equipment. Unfortunately, many contractors begin their business by purchasing a generator that meets the power needs of their current equipment, only to later discover that upgrading to a larger proportioner will require a more powerful generator. This oversight can lead to significantly higher costs down the line.
Stand Alone Generators Average cost: $25,000
Outfit your rig with a generator from IDI that can keep up with the demands of any job.
Sourcing the right size compressor is extremely important. Undersized units fail prematurely, and lead to unwanted downtime in the field. Once our team helps you determine the air requirements for your equipment package, we can select a compressor large enough to handle the load.
Stand Alone Compressors Average cost: $5,000
No matter if you need a gas or electric reciprocating air compressor, IDI has you covered with industry-leading options.
Options for Financing Equipment
Given the high costs of spray foam rigs, financing is typically applied to equipment purchases when starting a spray foam business. The good news is there are a number of financing options to choose from, so finding one that meets your needs shouldn’t be too difficult. Good equipment is the foundation of a profitable spray foam business. It lasts several years and retains much of its value, so financing is generally a sound decision.
Leasing equipment allows you to make monthly payments for the use of the equipment over a set number of years. This controlled cost is usually very manageable, especially as your company begins to attract more customers and higher paying jobs. You will often be given the option to buy the equipment outright after the terms of the lease, usually for a set percentage of the original equipment cost.
Banks can give out loans for spray foam equipment, just as they might for a car, house, or other large purchase. However, if your credit is less than stellar or you’re launching a brand new business—rather than expanding an existing one to include spray foam services—there’s a possibility that the bank may not approve your loan. To increase your chances of securing bank or SBA financing for your new venture, it’s crucial to have a rock-solid business plan that clearly demonstrates when your company will become profitable enough to cover all expenses, including debt servicing.
Similar to leasing, equipment financing agreements are generally for a set number of years with consistent monthly payment amounts. At the end of the finance period (and with a small purchase fee) you own the equipment outright. Monthly payments are generally higher than leasing, but still an affordable option for many.
IDI knows the spray foam business inside and out, so we know how important it is for your business to remain in control of your cash flow during the first months of operation. We’ve partnered with American Financial Partners (AFP) for more than a decade, offering financing terms that minimize your initial equipment spend in order to give spray foam businesses just like yours the best opportunity to succeed.
Check out the financing payment options IDI offers and fill out an application or get in touch with us to figure out what the best option is for you and your business. We are invested in your success and look forward to helping you find the ideal financing solution.
Managing and Financing Ongoing Operational Costs
Keeping the lights on, fueling your vehicle, paying for maintenance and replacement parts and keeping your insurance current are all costs that should be considered when starting your spray foam business. Similar to labor costs, initial operation costs can be covered by a range of financing options, including lines of credit and loans. Because of their relatively lower cost, operations can often be one of the first things covered by new cash flow.
Seeking Professional Financial Advice
During any stage of your business journey, but especially as you begin a new venture, it is wise to seek financial advice from outside professionals. Your financial advisor doesn’t need to have direct expertise with spray foam — although it wouldn’t hurt! — but one familiar with the construction and contracting world can make it easier to communicate and inform their recommendations. The right financial advisor should be able to give you advice both when you are seeking the initial financing for your business and also down the line when you are considering growth and expansion opportunities. In the event you are going to try for an SBA loan, your local Chamber of Commerce should have a SCORE chapter that is well versed in writing the business plans banks and lending institutions like to see.
Throughout your spray foam and insulation business startup journey, IDI is here to help. Reach out to our experts with any questions you have about equipment choices, financing options or spray foam in general. We look forward to hearing from you!
