12 Business Banking Tips for Roofers

Running a roofing business takes more than skilled labor and reliable materials — it takes smart financial management. From choosing the right business banking partner to building your business credit score, understanding how to handle credit cards, contractor loans and equipment financing can give your company the foundation it needs to grow. 

These 12 business banking tips will help you make informed decisions, protect your cash flow and prepare for long-term success.

Financial Partnerships

The first step you should take when managing your company’s business banking and financing is to establish a financial account for your business.

Tip 1: Shop Around for the Best Fit

Never immediately settle for the first partner you meet with. Consider the specific type of financial business service you need — accounts, loans, credits — and see how different lenders compare in each of these services.

While your first thought might be larger banks in your area, also consider local credit unions. Credit unions often prioritize customer service while offering lower fees and better rates, depending on your business needs.

Tip 2: Separate Personal and Business Accounts

When considering your business funding options, you may be tempted to simply use your personal bank accounts and credit cards for your business. But separating your personal and contractor accounts is paramount. 

Keeping separate accounts can simplify the bookkeeping process, helping you easily identify personal vs business transactions. It will help you provide a clear path for any future audits and legitimize your business.

Tip 3: Build Strong Relationships

Regardless of which financial partner you choose, do your best to develop a good, long-term relationship with your business banker. Make payments on time, communicate with them regularly and provide financial updates whenever possible.

Credit Cards

Business credit cards can help businesses streamline purchases, helping you buy supplies and earn rewards. The right contractor credit card can smooth out financial challenges when cash is tight, but can also add strain to your business if the card is not properly managed.

Tip 4: Evaluate Your Options

There are hundreds of business credit cards to choose from, but only a handful are worth your time. A few details to look for include:

• Low annual fees: Some credit cards have a $0 annual fee, others have fees over $700. A higher fee doesn’t necessarily mean it’s a worse card — the high fee may bring better benefits with it. Consider your financial situation to see how much of an annual fee you can afford.
• High rewards rate: Most credit cards either have a points-based rewards system (which convert to cash value) or cashback.
• Lucrative welcome bonuses: Credit cards will have a welcome bonus that reflects its rewards system. For example, a card that rewards you with points may offer an intro of 15,000 points (equivalent of $150), while a cashback rewards card may offer a bonus of $1,000.
• Intro APR period: Card companies may offer low or 0% annual percentage rates of purchases for a short amount of time. Once that period ends, the APR will increase to its regular, often higher rate on remaining balances. Stay alert when the intro period ends so you aren’t blindsided with hefty interest rates.

Tip 5: Minimize Carried Balances

One downside of using a business credit card is the higher interest rates on expenses when compared to the rates from business loans. Make sure to minimize the carried balance on your credit card to minimize monthly interest payments. Making some interest payments is crucial for building your credit score (more on that later), but it’s best to minimize how much those payments cost you.

Tip 6: Consider Applying for a Commercial Credit Card

Commercial credit cards are designed for larger companies, allowing you to give credit cards to your employees who can expense purchases to the company without using their own bank account. This helps alleviate some of the administrative burden from the owner, who can instead entrust purchases to their workers.

That said, you will still need to personally review the charges on the corporate account to ensure all purchases are for business-approved expenses. These cards should only be given to trustworthy employees. 

Loans

Contractor loans and business credit lines are essential resources for managing cash flow, covering shortfalls and handling equipment financing for larger purchases. Accessing capital through loans is a reliable way to grow your business, improve your creditworthiness and position your business for the future.

Tip 7: Prepare for a Financial Analysis

To qualify for loans and lines of credit, a lender will perform a financial analysis of your company, typically using the “Five C’s of Credit + One”, which includes:

• Cash flow
• Collateral
• Capital
• Conditions
• Character
• Communication

Lenders will likely also review the business owner’s personal credit history.

Tip 8: Pick the Right Type of Loan

Once you have your finances in order, it’s time to pick the type of loan that works best for your business needs. Here are three common types of small business loans you might consider:

• Term loans: A term loan provides a fixed amount of money upfront, which you will repay in fixed monthly installments over a set period. Term loans are best suited for one-time investments, such as purchasing new equipment, real estate or a business vehicle. The asset purchased is then usually used as collateral for the loan.

• Commercial mortgages: A commercial mortgage is used to purchase land or a building. It’s usually structured as a five-year loan with a fixed or variable rate, but is amortized over a much longer period in order to make the monthly payments reasonable. At the end of the five-year term, the loan must be paid off or refinanced for another period of time.

• Lines of credit: A line of credit is a more flexible financing option that functions like revolving credit — you borrow up to a set limit, repay it and borrow again as needed. This type of loan is used to cover working capital needs and short-term cash flow. 

Tip 9: Tap Into Loan Programs

If you’ve ever tried to get a business loan, you may have learned it’s harder than it sounds. That’s why there are programs, like the U.S. Small Business Administration’s (SBA) loan program or Canada’s Small Business Financing Program, which help small businesses get funding by establishing guidelines for loans and reducing lender risk. In other words, federally-backed loans make it easier for small businesses to get funding.

Credit Score

Your ability to obtain a loan will heavily depend on your company’s credit and financial history. Lenders will conduct business credit checks to look at your credit score, which can inform them of your creditworthiness.

To improve your business credit score, you need to build business credit. Here are some tips on how to do that:

Tip 10: Prioritize On-Time Payments

Credit history is heavily affected by whether or not you make timely payments. Set up auto-pay for minimum monthly payments to avoid penalties. Keep track of key monthly payment dates across all current bills and credit lines.

Tip 11: Plan Purchases in Advance

Making large purchases on a credit card can increase your credit utilization rate, which may lower your contractor credit score. Planning ensures you have the capital to quickly pay off those debts, therefore increasing your credit score.

Tip 12: Review Your Credit Score Annually

Be sure to review your personal and business credit scores regularly, ideally once a quarter. If you see it drop, seek to understand why (maybe you missed a payment or made too many large purchases too quickly). Make the necessary changes to bring your score back to where it was (or higher). 

Build a Financial Roof Over Your Business

Strong business banking habits don’t just keep your books in order, they build the confidence and flexibility to take your roofing company wherever opportunity leads. With the right financial partners and a plan to build business credit, you can bring your business to even greater heights.