Most buyers of a single plumbing company use an SBA 7(a) loan: up to $5 million, at least 10% equity for a complete change of ownership, up to 10 years for goodwill, and a personal guarantee from every owner of 20% or more. Larger shops and buyers rolling up several companies use conventional senior debt, commonly 2x to 3.5x EBITDA. Lenders underwrite the mix between service and construction work, where the calls come from and whether that transfers, who will hold the master plumber license, the warranty exposure on past jobs, and the trucks and equipment behind the loan.
- Usual structure
- SBA 7(a) for an owner-operator; conventional senior debt for larger shops and roll-ups
- Equity (SBA, complete change of ownership)
- At least 10% of total project costs
- What lenders value most
- Repair and drain service to a broad base of households and commercial accounts
- What lenders discount
- Builder rough-in work, home-warranty dispatch, revenue tied to the seller's name
- Question to settle before the letter of intent
- Who qualifies the plumbing license the day after closing
Why plumbing reads differently from HVAC
Plumbing and HVAC contractors are often grouped together, and the SBA data does the same: the SBA lending data for plumbing, heating and air-conditioning contractors covers both. The shared framework, recurring revenue, technicians and add-backs, is set out in financing an HVAC company acquisition. This page is about what is specific to plumbing.
Three things set plumbing apart in a lender's eyes. Demand is less seasonal: pipes burst in July too, and drains back up every month of the year. Revenue is less often contracted: a plumbing company usually has fewer maintenance agreements than an HVAC shop, so its recurring base is repeat customers and commercial accounts rather than a membership roster. And the work splits more sharply between a service business, which answers emergency calls at a good margin, and a construction business, which roughs in plumbing for builders on thinner margins with slower pay. Many plumbing companies do both, and the loan depends on the proportion.
The kinds of work, and how a lender weighs each
| Type of work | How a lender reads it | What proves it |
|---|---|---|
| Emergency service and repair | The core of a financeable plumbing company: steady, needs-driven, paid at the job | Call counts, average ticket and repeat-customer share from the dispatch software, by month and year |
| Drain and sewer (cleaning, camera inspection, jetting, line repair and replacement) | High margin and recurring for commercial accounts; sewer replacement jobs are large and carry warranty and excavation risk | Revenue by service, equipment list, warranty claims history |
| Water heaters and repipes | Replacement work driven by marketing and lead cost; good margin, lumpier than repair | Job counts and gross margin by year; lead sources and cost per lead |
| Backflow testing and inspection | Recurring by regulation where local codes require periodic testing; small tickets but reliable and a door into commercial accounts | Customer list of testing accounts, renewal history, the testers' certifications |
| Commercial service accounts (restaurants, property managers, facilities) | Valued when spread across many accounts and not dependent on one manager | Revenue by account; any service agreements and whether they can be assigned |
| New-construction rough-in for builders | The most cyclical line, concentrated in a few builders, often with retainage and slow payment | Builder concentration, backlog, payment history, retainage receivable |
| Home-warranty and insurance-referral work | High volume, set pricing and one paying company controlling the flow; lenders treat it as concentrated revenue | Share of revenue by referral company and the terms of those relationships |
A company that earns most of its profit from service and drain work to a broad base will usually support a larger loan than one with the same earnings from builder work, and its last full year counts for more. When construction or warranty-company work dominates, expect more equity, closer scrutiny of the trend across years, and questions about concentration covered in customer concentration in an acquisition.
Where the calls come from
A service plumbing company is, in large part, a phone number that rings when something breaks. Lenders therefore ask what makes it ring and whether that survives the sale. The answer is usually some combination of the company's name and reviews, its website and local search listings, paid lead sources, and referrals from property managers, realtors and other trades.
- Assets that should transfer: the phone numbers, website and domain, search and review listings, the dispatch and customer database, and the trade name. In an asset purchase each is assigned at closing; a buyer should confirm none is registered to the seller personally.
- What lenders look for in the trend: call volume, booking rate and average ticket over time, and marketing spend against revenue. A company whose calls depend on steadily rising paid advertising is a weaker credit than one whose calls come from repeat customers and its reputation.
- Flat-rate pricing: a company that prices from a documented price book, rather than the seller's judgment on each job, is easier for a new owner to run and easier for a lender to believe.
The master plumber, the crew and the testers
Most states license plumbing work through individuals, and a plumbing business typically operates under a licensed master plumber who is responsible for its work and permits. In small companies that person is often the seller. A buyer who is not licensed needs a staying employee who holds the license and agrees to qualify the business, or a plan to obtain it; lenders will not close a deal that leaves the company unable to pull permits on day one. Apprentices usually must work under licensed supervision, so the ratio of licensed plumbers to apprentices limits how much work the crew can take on.
Backflow testing certifications, medical-gas credentials and similar qualifications also belong to individuals. If one technician holds the certification behind a recurring revenue line, the lender will ask what happens if that person leaves. How lenders weigh a non-trade buyer is covered in buyer industry experience requirements.
Find out who qualifies the license, and who holds each certification behind a revenue line, before you sign the letter of intent.
Warranties and callbacks on work already done
Plumbing companies guarantee their work, and some of it fails later: a repipe that leaks, a sewer line that settles, a water heater installed without the right venting. A buyer who wants to keep the company's reputation will honor those callbacks even where the purchase agreement says otherwise, and in a stock purchase the obligation comes with the entity anyway.
Lenders ask for the warranty and callback history, the cost of callbacks by year, and the company's liability and completed-operations insurance. Where the seller did large sewer or repipe work shortly before the sale, buyers often negotiate an escrow or holdback to cover claims, which the loan structure has to accommodate. See escrows and holdbacks in acquisition financing and asset purchase vs stock purchase.
Trucks, stock and working capital
Each service truck carries parts inventory, and drain and sewer work adds jetters, camera equipment and sometimes excavation machinery. That equipment gives the lender collateral that a pure service business lacks, valued on an appraisal rather than on what the seller paid. Inventory on the trucks and in the shop is counted at closing and priced in the agreement.
Trucks wear out on a schedule. Lenders look at fleet age and mileage, and if the seller stopped replacing vehicles in the years before the sale, they may deduct a replacement allowance from earnings. A simple example: earnings before debt service of 1,400, less a truck replacement allowance of 150, leave 1,250 against annual loan payments of 1,000, which is coverage of 1.25x, the level banks commonly look for and SBA requires on historical results for changes of ownership from 1 October 2026. See maintenance capex.
Service work is usually paid at the job, so a service-heavy company carries few receivables. Construction and commercial work is billed and paid later, with retainage held back on builder jobs. The more of that work a company does, the more working capital the buyer needs at closing; see working capital at close and lines of credit for HVAC and plumbing contractors.
Structuring the purchase
For an owner-operator buying one company, SBA 7(a) usually fits: it finances goodwill over up to 10 years with at least 10% equity. The seller may consult for up to 12 months after closing, or up to 24 months under SOP 50 10 8.1 from 1 October 2026, but may not stay on as an owner, officer or employee, which matters when the seller is the license holder. A seller note counts for up to half of the equity injection only on full standby for the life of the SBA loan; see seller notes and SBA's full-standby rule.
Where the amount financed, less appraised real estate and equipment, exceeds $250,000, SBA requires an independent business valuation, and the purchase loan cannot exceed it. From 1 October 2026 every change of ownership needs financial due diligence, with a quality of earnings report on acquisitions of $3 million or more excluding real estate.
Plumbing companies are also frequent targets for buyers assembling several home-services businesses. Those buyers usually outgrow SBA's limits and use conventional senior debt, sized on combined earnings and commonly 2x to 3.5x EBITDA, with the first company as the platform. The mechanics are in financing add-on acquisitions and SBA 7(a) vs a conventional acquisition loan. If the company owns its shop and yard, see business acquisitions with real estate.
What goes in the file
Lenders need the standard acquisition documents listed in what lenders need to finance an acquisition: two to three years of business tax returns, the P&L and balance sheet, the latest full year of figures (never an older year), a year-to-date P&L, the debt schedule, the letter of intent, and each 20% owner's personal tax returns and personal financial statement. For a plumbing company, add:
- Revenue by type of work (service, drain and sewer, replacement, backflow, commercial, construction, warranty-company) for each year.
- Dispatch reports: call volume, average ticket, repeat customers and lead sources.
- The license position and a technician roster with certifications, tenure and who is staying.
- A fleet and equipment list with year, mileage or hours, and any liens.
- Warranty and callback history, and insurance loss runs.
- For construction work: builder concentration, backlog and retainage.
Once the documents are in, Transparent builds the financing model, lender presentation, blind teaser and underwriting memo in a day and takes the file to the lenders in its book that finance the trades. See the package.
Common questions
- Is a plumbing company easier to finance than an HVAC company?
- Often slightly, because plumbing demand is less seasonal and more repair-driven. But HVAC companies tend to have more service agreements. The revenue mix, the license holder and the seller's role matter more than the trade.
- Does backflow testing count as recurring revenue?
- Lenders usually treat it as recurring where local codes require periodic testing and the company has a renewal history with the same accounts. It is valued more if more than one technician holds the certification.
- Most of the work comes from a home-warranty company. Is that a problem?
- It is concentration. One company controls the flow of work and the price, and can stop sending it. Lenders will discount that revenue and look for the service base the company owns directly.
- The seller is the master plumber. Can the seller stay on to hold the license?
- Not as an employee in an SBA-financed complete change of ownership. The seller may consult for up to 12 months, or up to 24 months under SOP 50 10 8.1 from 1 October 2026. The buyer, a staying employee or a conventional structure has to solve the license.
- Can the trucks be financed separately from the acquisition loan?
- Yes. Buyers sometimes finance vehicles and equipment with equipment loans alongside the acquisition debt, which lenders coordinate through the lien structure and count in debt service.