An owner-operator buying a roofing company usually finances it with an SBA 7(a) loan: up to $5 million, up to 10 years for the goodwill that makes up most of the price, an equity injection of at least 10% for a complete change of ownership, and a personal guarantee from every owner of 20% or more. Larger companies and roll-ups use conventional senior debt. Whichever route, the lender underwrites a normal year rather than a storm year, the mix of retail, insurance and commercial work, how the crews are employed and insured, the warranty tail, and who holds the contractor's license after closing.
- Usual structure
- SBA 7(a) for most owner-operator buyers; conventional senior debt for larger companies and platforms
- Equity (SBA, complete change of ownership)
- At least 10% of total project costs
- Collateral
- Light: trucks, trailers, lifts and receivables; the price is mostly goodwill
- What lenders probe hardest
- Storm-driven revenue, the insurance-claim mix, subcontracted crews, workers' compensation, warranties, the license qualifier
- Documents beyond the standard list
- Revenue by type of work by year, job list, crew and insurance records, warranty claims history, deposit schedule
Four roofing businesses that file the same tax return
Lenders like roofing for the same reason homeowners cannot put it off: a leaking roof gets replaced. But a roofing company's tax return hides what kind of roofer it is, and the kinds carry very different risks. The first thing an underwriter does is split the revenue by where the work comes from. The SBA lending data for roofing contractors gives the industry picture; this is how a lender reads a single company.
| Type of work | How it earns | What a lender worries about |
|---|---|---|
| Residential retail reroofing | Homeowners replacing an old roof, found through referrals, yard signs and marketing | Whether leads depend on the seller's name or on a marketing machine the buyer can keep running |
| Insurance restoration (storm work) | Replacing roofs damaged by hail or wind, paid largely by the homeowner's insurer | Volatility: revenue follows the weather, and collections wait on claim approvals and supplements |
| Commercial reroofing and new construction | Larger jobs for building owners and general contractors, often bid and sometimes bonded | Backlog, retainage, margin on fixed-price bids, and a few customers making up much of revenue |
| Repair, service and maintenance | Leak calls, inspections and maintenance agreements, mostly on commercial roofs | Usually the steadiest line; lenders want to see the agreements and the repeat customers |
A company with a large service and retail base and a modest share of storm work reads as a steady credit. A company that doubled its revenue chasing a hailstorm two states away reads as a good year that may not repeat. Most sit somewhere in between, and the file should show the split plainly rather than leave the lender to guess.
Storm years and ordinary years
Sellers naturally want to be paid on their best year. Lenders size debt on what the business can earn every year, because the payment is due every year. When the most recent year includes a storm, a lender will look at the years around it and ask what revenue and margin looked like without the storm work. A simple illustration: a company that earned 400 in two ordinary years and 900 in a hail year does not have a 900 business; a lender might size on something closer to the ordinary years, and credit part of the storm year only if the company has a record of storm work in most years.
This matters more from 1 October 2026, when SOP 50 10 8.1 requires an SBA change of ownership to show debt service coverage of 1.25x on historical results. That test runs on history, and the file must carry the latest full year, so a storm year is often the year being tested; a lender will not let it stand in for every year. Where the storm year drives the price, the gap between what the seller wants and what the lender will lend has to be closed with more equity, a seller note or a lower price. How lenders test a price is covered in how lenders decide if the purchase price is too high.
Show the lender every year, the storm year included, broken out by type of work. A normalized view the buyer builds is more credible than one the lender has to build itself.
Crews, subcontractors and the insurance bill
How a roofer staffs its jobs changes both its costs and its risks. Some companies employ their installers; many use subcontracted crews paid by the square or by the job. Subcontracting keeps fixed costs down, which lenders like in a volatile trade, but it raises two questions. Will the crews keep working for a new owner? And are they really independent contractors, or employees in all but name? Misclassification can bring back payroll taxes and workers' compensation premiums after the sale, and lenders look for how the seller handled it.
Insurance is a large cost in roofing because the work is dangerous. Workers' compensation premiums depend on payroll, classification and the company's own claims history, and general liability premiums follow the type of work. A company with a poor safety record pays more and may struggle to be insured at all. Lenders ask for the policies, the loss runs and any open claims, because a serious fall or a lapse in coverage can threaten the business outright.
The contractor's license is the other staffing question. In many states a roofing or contractor license is held through a qualifying individual, and in a small company that is often the seller. If the seller holds it, the buyer needs a plan: qualify personally, rely on a staying employee who qualifies, or arrange a transition. Under SBA rules the seller cannot stay as an owner, officer or employee after a complete change of ownership, but may consult for up to 12 months, or up to 24 months under SOP 50 10 8.1 from 1 October 2026. A consulting seller is not a long-term license plan, and lenders know it.
Warranties and manufacturer certifications
Every roof a company installs carries a workmanship warranty, and some carry a manufacturer's warranty that depends on the installer being certified by the manufacturer. Those promises run for years after the job is paid for. When the company is sold, those promises do not go away. In a stock purchase they stay with the company. In an asset purchase the buyer can leave old warranty liabilities with the seller on paper, but homeowners will still call the name on the truck, and most buyers honor the claims to protect it.
Lenders ask for the warranty claims history: how many callbacks there have been, what they cost, and whether any were systemic, such as a crew that installed a product incorrectly across many jobs. They also ask whether manufacturer certifications, which can drive leads and let the company offer longer warranties, will carry over to the new owner or have to be earned again. Either way, the buyer should price the expected callbacks into the deal, through the purchase price or an escrow or holdback. The structural difference is explained in asset purchase vs stock purchase.
Deposits, materials and receivables
Roofing working capital has a shape of its own. Homeowners pay deposits before work starts, which the company has already spent on materials or payroll by the time the job is done. Insurance jobs are often paid in stages as the carrier approves the claim and any supplements. Commercial jobs carry retainage that is paid only at completion. And the company usually buys shingles and membrane on credit from a distributor.
At closing, that means two things. First, customer deposits on jobs not yet built are a liability the buyer inherits: the buyer will do the work, so the purchase agreement should either transfer the deposit cash or credit the buyer for it. This is where a working capital peg earns its keep. Second, the buyer needs enough cash or an available line after closing to buy materials for the season's jobs before customers pay. Lenders that lend against receivables are more cautious with insurance-claim receivables and retainage than with ordinary invoices; lines of credit for roofing contractors covers how they are sized.
Roofers sometimes carry merchant cash advances taken during slow months. They are the seller's debt and should be paid from the seller's proceeds at closing; SBA will not refinance an active advance. See what happens to the seller's loans.
Putting the structure together
Because a roofer's hard assets are modest, the purchase is mostly goodwill, and SBA 7(a) is built to finance goodwill over up to 10 years with a modest equity check. Conventional senior lenders, who commonly lend 2x to 3.5x EBITDA to lower-middle-market companies, fit larger roofers and buyers assembling several companies, but they will want more equity and will look hard at the storm mix. More on financing mostly-goodwill deals is in financing a business purchase that is mostly goodwill.
| Question | SBA 7(a) | Conventional senior debt |
|---|---|---|
| Loan size | Up to $5 million | Sized to normalized earnings |
| Term for goodwill | Up to 10 years | Usually shorter |
| Buyer equity | At least 10% of project costs | Usually more |
| Seller note | Counts for up to half of the injection only on full standby for the life of the loan; otherwise it is debt in the coverage test | Subordinated to the senior lender, payments allowed within covenants |
| Price tied to future storms or revenue | Not allowed: no earnout to the seller | Possible, subordinated to the lender |
| Trucks and equipment | Financed inside the loan | Sometimes financed separately by equipment lenders |
A seller note is often the tool that bridges a storm-year price and an ordinary-year loan. How it has to be written is in seller notes and SBA's full-standby rule. For a commercial roofer that bids bonded work, the surety's view matters as well: a bonding company underwrites the new owner, and a buyer who cannot keep the bonding line keeps only part of the business.
Building the roofing file
Start with the standard acquisition documents 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 signed letter of intent, and the personal tax returns and personal financial statement of each owner of 20% or more. Then add what a roofing lender will ask for anyway:
- Revenue and gross margin by type of work (retail, insurance, commercial, service) for each year.
- A job list for the latest year with customer, type, contract value and status, and the current backlog.
- How crews are engaged, with subcontractor agreements and certificates of insurance.
- Workers' compensation and liability policies with loss runs.
- Warranty claims history and manufacturer certifications held.
- The schedule of customer deposits on open jobs, and the license and who qualifies it.
Transparent builds the lender package from these, the financing model, lender presentation, blind teaser and underwriting memo, in a day once the documents are in, with the normalized year laid out beside the actual ones so no lender has to reconstruct it. What the package contains is on the package.
Common questions
- Will a lender count storm revenue?
- Partly, and only with evidence. Lenders look at every year and ask what an ordinary year earns. A company that has done storm work in most years gets more credit for it than one whose revenue jumped after a single event.
- Can I buy a roofing company with an SBA loan if the seller holds the license?
- Yes, if the license question is solved before closing. The buyer can qualify personally, rely on a staying employee who qualifies, or arrange a transition. The seller can consult for up to 12 months after an SBA-financed change of ownership, or up to 24 months under SOP 50 10 8.1 from 1 October 2026, but cannot remain an employee.
- Do subcontracted crews make a roofing company harder to finance?
- Not in itself. Lenders want to know that the crews will keep working for the new owner and that they are properly classified and insured. A company whose crews are loyal to the seller personally is the harder case.
- What happens to customer deposits at closing?
- They are money paid for work the buyer will now do. The purchase agreement should either pass the cash to the buyer or reduce the price by the same amount, usually through the working capital adjustment.
- Is an earnout allowed when buying a roofing company with an SBA loan?
- No. SBA prohibits an earnout to the seller in a change of ownership it finances. A seller note for a fixed amount is the usual alternative. It counts toward the equity injection only if it is on full standby for the life of the SBA loan, and then for no more than half of it.