How do HVAC and plumbing companies refinance merchant cash advances?

The year an HVAC company actually has

A residential HVAC business does most of its work when the weather is at its worst: cooling calls and system replacements in the heat, furnaces and boilers in the cold. Spring and fall are quiet. Plumbing is steadier, but a combined shop still feels the swing. The costs do not follow the weather. Technicians are paid through the slow months, because a company that lets them go in April cannot find them in July. Trucks, insurance, the shop lease and the dispatch software cost the same every month.

The table shows the real problem. Even a well-run company is short in the shoulder quarters, and in a normal year the peaks make it good. Advances turn the shoulder shortfall into a crisis, because they take their full debit in April just as in July. An owner who takes an advance in spring to make payroll starts the summer with debits that eat the peak, and the refill never comes. By fall a second position is covering the first.

A consolidation fixes the shape of the payments, not only their size. One monthly payment, sized so the year covers it with room to spare, leaves the shoulder quarters short by an amount the peaks can replace. That smaller gap is a job for a modest line of credit or a cash reserve. See seasonal lines of credit.

Three other ways the stack starts

• A commercial job. A residential shop takes on a rooftop unit replacement or a new-construction contract. Equipment is bought up front, the general contractor pays on a progress schedule, often only when it has been paid itself, and holds retainage until the job closes out. The company is now financing part of a building project, and an advance was the only money on offer.
• Equipment bought ahead of a change. Equipment makers raise prices and refrigerant and efficiency rules change, and a company that stocks condensers, furnaces and water heaters ahead of the change ties up cash in its warehouse.
• Trucks. A service company is its fleet. Replacing several vans at once, or adding them for new technicians, is a large outlay that an advance funds quickly and an equipment lender funds on a term matched to the trucks.

Homeowner financing is not usually the cause. When a homeowner finances a new system through a consumer lending program, the company is typically paid by the finance company soon after installation, less a dealer fee. The cost lands in margin rather than receivables. A lender will still ask how much of the replacement business runs through those programs, because a change in the program's terms moves gross margin directly.

Reading an HVAC company the way a lender does

A lender underwriting a trade business is trying to separate the revenue that will be there next year from the revenue that depends on this year's weather and this year's jobs. The split changes how much the business can borrow, and from whom.

The earnings a lender uses are the full year's, before any advance cost, and before the event that started the stack if the file documents it. See EBITDA add-backs. Because advances in this trade so often funded commercial work, the lender will test whether the jobs they financed have actually been collected. On books that record revenue when it is billed, billing ahead of the work makes the year look better than the work done, so a lender compares billings with costs on each open job. A company without a job schedule will be asked to build one.

Structures that fit a seasonal trade

• A consolidation term loan sized on the year's earnings, paying off each advance at close. Some lenders will shape the payment to the season, for example with interest-only months in a shoulder quarter; most want a level monthly payment that the whole year carries. See interest-only periods and reamortization and how a consolidation is sized.
• A line of credit on commercial receivables. Invoices to property managers, general contractors and facility owners can form a borrowing base, and asset-based lenders typically advance 80% to 90% of eligible receivables. Retainage generally does not count until it is billable, and homeowner receivables are usually too small and scattered to lend against. See lines of credit for HVAC and plumbing contractors.
• A fleet refinance. Trucks and vans owned outright, or with equity in them, can be refinanced to add proceeds, provided the advance funders' liens are released at the same closing. See refinancing equipment loans.
• SBA, later. HVAC and plumbing companies are common SBA borrowers, but SBA will not refinance an active merchant cash advance. From 1 October 2026 an advance becomes eligible only once converted to a term loan that has amortized for at least 24 months with no new advance since. For a company with active advances, SBA comes after a first refinance, not instead of it. See getting a bank loan after advance history.

Size the loan to the year and keep a line or a reserve for the shoulder months. A loan that leaves nothing in April puts the company back in front of an advance funder the next spring.

What the file must show

• Monthly revenue and gross profit for the last two to three years, so the lender sees the seasonal pattern instead of guessing at it.
• P&L and balance sheet for the last full year, a year-to-date P&L through last month-end, and business tax returns for two to three years.
• A count of active service agreements, and how many renewed last year.
• A job schedule for every open commercial job: contract value, billed to date, cost to date, retainage held.
• An accounts receivable aging by customer, with retainage shown separately.
• A fleet and equipment list with titles and any liens.
• Every advance agreement, a current payoff letter for each, and a debt schedule showing them beside the truck notes and any line.
• Bank statements for each month the advances have been debiting, and a short account of why they were taken and what has changed.

Transparent builds the lender package from these in a day once they are in: financing model, lender presentation, blind teaser and underwriting memo. The model lays the year out month by month, so a lender sees the shoulder shortfall and the peak that covers it, rather than discovering the dip in the bank statements and wondering what else it missed. Of the lenders in Transparent's book, 1,148 write term & private credit and 235 write asset-based & lines; see the lender book.

Mistakes that cost trade companies the refinance

• One more advance while the refinance is arranged. A lender that finds a new position in the latest statements stops, because the payoff it sized is no longer the payoff.
• Payroll taxes left unpaid to cover debits. It happens in trade businesses under advance pressure, and it changes the refinance: a filed federal tax lien can rank ahead of a new lender, so the arrears usually have to be paid at close or put on an agreement with the IRS first. See refinancing with unpaid payroll taxes.
• A peak quarter presented as the run rate. Lenders annualize the whole year; leading with July makes the rest of the file look like it is hiding January.
• The commercial job left out of the story. If a job caused the advances, the lender will find it in the receivables. Say so first, with the job's status.