How a Business Loan Could help you to Start Your Own Business
The financial crisis which engulfed the world back in 2007-08 threw lots of people into financial difficulty, and many were left jobless and unable to meet their financial commitments. Since then, people have developed a very nervous attitude towards debt, thinking that it will only lead to financial problems. Actually though, when used sensibly, some kinds of debt can work to your advantage.
When I started my cleaning business Blades Maintenance over a decade ago, I did it with the aid of a business loan. At the time, I was working as a window cleaner for another company and the wages really weren’t all that great. After paying my monthly commitments, there wasn’t an awful lot of cash left over to save up in order to start my own window cleaning business. So how did I get to the point of becoming self-employed and owning my own business?
How to Start a Window Cleaning Business
If you’re not fully clued up on how most people start a window cleaning business, let me explain the basics a little. To build your own window cleaning business, you basically have one of two ways you can go about it.
- Canvassing the work
- Buying an established window cleaning round
First of all, you could head out canvassing. You could do this by leaflet dropping, advertising or best of all, actually knocking on some doors and asking for the business. The drawback to this is that it takes quite a bit of time to build up your work this way. Not only this, but you also often end up with odd houses here and there and because of this, you tend to waste a lot of time in your van going in between jobs. On the flipside however, you have the advantage that any work that you pick up in this way won’t cost you a penny, as it would if you were to buy an established window cleaning round.
This leads us nicely on to our second way of getting started, buying an established window cleaning round. Window cleaning rounds don’t come cheap! They vary drastically in price, usually depending on which area of the country you live in and also the quality of the work being offered for sale. Rounds are generally valued and sold based on a multiple of their monthly takings. These multiples tend to range between 3-10 times the monthly takings of the round, depending on which area of the country you live. So, if a round produces £1000 per month in takings and the buyer is asking for 10 times the monthly takings, then the round would cost you a cool £10,000. Like I said, not cheap!
How could a business loan help?
If you are working for somebody else as a window cleaner and your wage isn’t all that great, then it is probably going to take you a very long time to save the money needed to set up your own window cleaning business. In this situation, getting a business or even a personal loan from a company like Zopa – which can be used for business purposes if you area sole trader – could really be helpful to you. Why?
Let’s imagine that you take out a £10,000 loan to buy your first window cleaning round and the round takes over £1000 per month. You take out a loan over 3 years to buy it, but because you have £1000 a month of extra income coming into your bank account, you manage to repay the loan much earlier than that. After the loan has been repaid, not only will you then have £1000 a month of extra income coming in, you will also be the owner of a window cleaning round which is worth £10,000 – assuming you don’t start losing work of course. So you could feasibly start your own business and earn the same amount of money that you’re earning now, whilst at the same time building up an asset.
It is also good to consider your potential daily earnings here too. When working for a company as a window cleaner on a self-employed basis, most window cleaners that I know earn somewhere between £40 and £100 a day. When working for yourself however, you have the potential to earn anything up to £400 a day if you have well priced work and use a water fed pole system. You may even earn more. Once you are earning this kind of money in a day, you will likely find that saving up the cash to buy your next round isn’t too difficult at all, so you won’t have to rely on taking out a loan next time around. And don’t forget that you could still be working for someone else while you repay the loan, as you will likely still have a good amount of free time available on top of the time spent working your own round.
The main point to take away then is that not all debt is bad and in some cases it can even be helpful to give you a financial leg-up, especially when you are considering starting your own business.