How can a lender view an HVAC company’s service contract revenue?
Lenders look for recurring revenue they can verify. Show the contract list, renewal history, billing records and the cash that actually arrived. They will ask how many customers renew, how concentrated the revenue is and whether the contracts pass to a buyer. Clear records make the income easier to count on.
A lender wants to know how likely the money is to keep arriving. Prepare a list of service contracts that shows each customer, the start date, the renewal pattern and the price. Pair it with bank deposits so the lender sees real cash, not just invoices. Differences between billed and collected amounts will draw questions.
Expect questions about quality. How many contracts renew without a push? How much comes from a few large accounts? What happens when a contract customer cancels, and how often does that occur? A lender may also ask who holds the customer relationships, because contracts that depend on the owner personally are harder to rely on.
Show how this income relates to repayment. Recurring revenue can steady a debt service coverage calculation, but only if costs of delivering the service are also clear. Break out technician time, parts and travel. Your accountant can prepare these figures well before the lender asks, and your lawyer can confirm whether the contracts allow transfer to a buyer. Keep service agreements, price lists and the renewal calendar in one folder so the lender’s questions can be answered within a day.
Key takeaways
- Pair the contract list with bank deposits so revenue is visible as cash.
- Prepare renewal and cancellation history for the lender.
- Show the cost of delivering contract work, not just the income.
- Keep contracts, price lists and the renewal calendar in one folder.
Related reading
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat is the debt service coverage ratio (DSCR)?
- 02Business Development Bank of CanadaGovernmentWhat are financial statements?
- 03Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 04Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
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