How does the Source of Funds section impact the business plan for a House Cleaning Service?

The source of funds section of the business plan is the second part of the section on start up, acquisition and expansion financing that we discussed in an earlier section. Once we have established how much money we need for either starting, purchasing or expanding a House Cleaning Service we now have to tell the reader of our business plan just how we intend to go about getting the financing that we are looking for. The source of funds section is a simple listing of where we anticipate all our financing to come from for our House Cleaning Service.

How much money should I contribute to my House Cleaning Service?

The answer to this question largely depends on your personal and business credit as well as you cash flow situation. Clearly the smaller your contribution to the total amount of funds you need to get the business going, purchase or expand your business, the more you will have to borrow in the form of a small business loan from a bank or non-bank lender or partner. The larger the loan amount, the higher will be the cost of servicing the debt and thus the more significant the impact on your cash flow as in the case of Spotless Homes Inc. located in Marietta, Georgia. In the end each small business owner has to evaluate this balance between how much they contribute and how much they borrow in the context of their own financial and cash flow situation.

What contributions levels do banks like to see?

Most small business advisors agree that even in good times a small business owner should come up with at least 10% of the total funds needed to get the business going. In the case of Spotless Homes Inc. we recommend that our client Anthony Cruz do the same. When banks are lending freely and money is loose, they may even come up with the entire amount you need without any contribution from you, but just having your money in the game tends to bring in a fiscal discipline that we think is very important.

Can I get funds for starting a House Cleaning Service?

The short answer is you should be able. If you have a sound business plan for your House Cleaning Service, a good personal financial statement and you are able to meet the five C's of lending - Credit, Collateral, Capacity, Cash Flow and Character - you stand a good chance that your application will be perceived in a positive light.

What kind of facility can a small business owner like Anthony Cruz of Spotless Homes Inc. expect to get from banks?

There are two kinds of loans in the small business world that a House Cleaning Service has access to - a traditional term loan where you are given a check at the closing for the entire amount approved and have to pay a set payment consisting of interest and principal. There may or may not be a prepayment penalty and these loans may or may not re-amortize. Typically these term loans for a House Cleaning Service last between 3 and 4 years and their interest rates are based on the prime rate plus a margin which is arrived at depending on the credit and other aspects of the loan application that small business owners like Anthony Cruz fill out and submit.

Yet another option for small business owners like Anthony Cruz of Spotless Homes Inc. is a line of credit - this is typically a line that one can draw into as needed and also pay down when it is convenient to do. Many lines of credit can have interest only payments but may require that a small business owner like Anthony Cruz clean up or pay down the line for a period of 30 days every year. Sometimes you can also get a combination line and business loan, where you can use the line for the first year and after that the balance is termed out and converts into a term loan.

Quick Links:

1. Go to the Corresponding Template section for this industry.
2. Go to the Corresponding Business Plan section for this industry.