Written for plumbers, electricians, water heater and heat pump installers, drain and sewer shops, and small multi-trade firms serving homeowners and property managers, with Texas, California, Florida and New York in detail.
The short version
- Map your cash week by week.Build a 13-week cash flow. Service pays at the truck. Warranty companies, property managers and commercial jobs pay on their own terms.
- Speed up the slow money.Collect at the truck, tie install deposits to equipment ordered within your state's limits, and chase warranty companies and property managers weekly.
- Test any loan before you sign.Divide cash flow after draws and taxes by a full year of all loan payments. Check it against the lender's own minimum and definition.
Cash in this trade swings with the weather and with who is paying. Freezes, holidays and summer AC-season calls drive service peaks by region, replacements spike with failures, and spring and fall are tune-up and membership seasons. Service pays at completion by card. New construction and commercial work pays slower.
A 13-week cash flow with your real receipts
- Service.Paid at completion by card. Collect at the truck.
- Installs.Deposit, progress and completion payments. Tie the deposit to the equipment ordered, within your state's limits: in California, for example, a home improvement down payment may not exceed $1,000 or 10% of the price, whichever is less, as of Oct 2026.
- Memberships.Monthly. Book prepaid memberships as deferred revenue, not as income on the day.
- Home warranty companies and property managers.Paid on their terms. Chase them weekly.
- Commercial pay apps.Paid less retainage. Keep retainage receivable separate and calendar each release date.
- Money going out.Payroll, supply houses, truck notes, insurance, fuel, software, sales tax and estimated taxes. Update the sheet every Monday.
Days sales outstanding are receivables divided by credit sales, times 365. For example, $36,000 owed on $480,000 of credit sales a year is 27 days. Track it by customer type, because warranty companies, property managers and commercial jobs pay on their own terms.
Can the business carry another truck?
Truck and equipment loans are priced off prime or Term SOFR, and lenders look at returns, debt service and your own credit. The test that matters is debt service coverage: the cash flow available for debt service (EBITDA less owner draws and taxes) divided by total annual debt service. Run it before you sign, against the lender's own minimum and definition.
| Existing annual debt service | $30,000 |
| New truck payments: $1,349.29 a month x 12 | $16,191.48 |
| Total annual debt service | $46,191.48 |
| Cash flow you need to stay at a 1.25x minimum | $57,739.35 |
1.25 x $46,191.48$8,000 down from cash and $65,000 financed over 60 months at 9.00% fixed (prime at 7.00% since September 17, 2026, plus a 2.00 point spread; confirm prime on the Federal Reserve's H.15 release) gives $1,349.29 a month and $15,957.40 of interest over the term. With $60,000 of cash flow available, coverage is $60,000 / $46,191.48 = 1.30x against an assumed 1.25x minimum. Replace every input with the lender's written offer.
Timing matters as much as the ratio. The first payment falls about 30 days after funding. In the worked example, the 13-week model holds 3 months of all debt service, $11,547.87, as a reserve on top of the $8,000 down payment.
Coverage is measured on a full year of debt service, and a payment that fits a peak week can still break a slow one.
If you plan an SBA 7(a) or 504 loan, check ownership first. As of Oct 2026, every direct and indirect individual owner must be a US citizen or US national principally resident in the US, and a lawful permanent resident may own no share. Have the lender confirm it against the current SBA SOP 50 10.
Keep the sales tax you collect in a separate account so it is there when the return is due. And when the Federal Reserve meets (the next decision is October 28, 2026), recheck rates the next day before you quote a financing cost.
Asked in Greymill
Existing loans: $30,000 a year
New truck: $1,349.29 x 12 = $16,191.48
Total: $46,191.48
Coverage: $60,000 / $46,191.48 = about 1.30x
Coverage is cash flow after draws and taxes, divided by a full year of loan payments.
If your lender's minimum is, say, 1.25x, you need about $57,739. A drop of about $2,261 in cash flow puts you at the limit.
The trap: a payment that fits a busy month can still break a slow one. Run it through a 13-week cash flow first.
Reserve: set aside, for example, 3 months of all loan payments, about $11,548, on top of the $8,000 down.
Swap in the lender's written offer and their own minimum and definition of coverage. Shall I build the 13 weeks with the truck in it?
Ask it about your own business
Paste this into Greymill with your own figures, and Cash & Profit works it through for your business.
I run a plumbing, heating or electrical business in [state], in the US. Build me a 13-week cash flow: service brings in about [amount] a week, I have [number] installs booked with deposits of [amount], memberships bring [amount] a month, and home warranty companies, property managers and GCs owe [amount]. Payroll is [amount] a week and truck notes are [amount] a month. I am looking at a [price] truck with [down payment] down at [rate] over [months]: tell me my debt service coverage and whether the business can carry it.
More for plumbing, heating and electrical in the US
- My flat-rate book came from a competitor: is it paying after drive time and callbacks?Flat-rate prices only work if the hourly rate inside them is built from the hours your techs actually sell, not the hours you pay.Read the lesson
- Do I charge sales tax on this repair? Why the same job is taxable in one state and not the nextWhether a plumbing or electrical job carries sales tax turns on the state and on whether it repairs or improves real property, and a wrong guess can build up for years.Read the lesson
- Who can pull the permit, and what happens if a helper runs the gas line?The license holder of record carries the work, so who does the job, who pulls the permit and who supervises decide whether you keep the license and can enforce the contract.Read the lesson
- How much can I take up front on a home job, and when can the customer cancel?Down payment limits, cancellation rights and required contract wording all change by state, and getting them wrong can mean refunds, misdemeanor charges or license discipline.Read the lesson
- I pay techs flat rate and helpers on 1099s: am I building up back pay?Flat-rate and commission pay, drive time, on-call and 1099 helpers are where shops in this trade build up back pay without noticing.Read the lesson
- Selling the replacement at the kitchen table: options, financing and what I can claimPresent replacements as clear priced options with honest financing, and know the rules on dealer fees, fear selling and reviews before you start.Read the lesson
- A customer says my work flooded their house months later: what do I do?When a leak or failure is blamed on your work, report it, keep the evidence and watch the deadline on any defect notice, or you can lose the right to fix it first.Read the lesson
Open the interactive lesson · Every plumbing, heating and electrical lesson · What Greymill knows about the trade
Sources
The primary sources behind this lesson, checked Oct 2026.
- Open market operations; NY Fed SOFR (Market sources, rates and lending conditions)
- Notice 5000-876626 p.1 transition, pp.2 to 3 Section A Ch.1 paragraph F, p.4 Appendix 3 (Market sources, rates and lending conditions)
- BLS Occupational Outlook Handbook, Pay tabs, May 2025 medians (Market sources, rates and lending conditions)
- Davis-Bacon wage determinations (Market sources, rates and lending conditions)
- October 28, 2026 statement; FOMC calendar 2026 (federalreserve.gov/monetarypolicy/fomccalendars.htm) (Market sources, rates and lending conditions)
- 16 C.F.R. 429.0, 429.1 (Home improvement contracts, cancellation and collections)
- 16 C.F.R. 429.0(a), exclusions (3) and (5) (Home improvement contracts, cancellation and collections)
- secs. 7159, 7159.5, 7159.10 (Home improvement contracts, cancellation and collections)
- Civ. Code secs. 1689.6, 1689.13 (Home improvement contracts, cancellation and collections)
- Bus. and Com. Code ch. 601; Prop. Code sec. 53.255, ch. 27 (Home improvement contracts, cancellation and collections)
- 2026 Fla. Stat. sec 489.126(2) (Home improvement contracts, cancellation and collections)
- IRC sec. 7503 (The calendar: 1099-NEC, OSHA, local law 152)
- 1904.32(b)(6) (The calendar: 1099-NEC, OSHA, local law 152)
- FOMC calendar (The calendar: 1099-NEC, OSHA, local law 152)
- Inspection schedule (The calendar: 1099-NEC, OSHA, local law 152)
- Compliance date (The calendar: 1099-NEC, OSHA, local law 152)