Guide

Why do banks turn down cleaning companies for loans?

Because a cleaning company is labour on top of a van and a cupboard of supplies — almost no collateral, and a bank's model is built to secure against assets. Recurring contract revenue is what a revenue-based funder wants instead: predictable, contracted and easy to verify against deposits.

Why the bank says no

The cost base is payroll, and payroll is not an asset. There is very little for a bank to secure a facility against.

Commercial contracts commonly pay on thirty to sixty day terms while your crews are paid weekly, so the business is structurally short of working capital even when it is profitable.

Margins are thin and competitive, which reads as fragility on a model that looks at profit rather than at contracted revenue.

What each underwriter weighs

A BANKA REVENUE-BASED FUNDERPERSONAL CREDIT SCOREheavysomeCOLLATERAL TO PLEDGEheavynot looked atTWO YEARS OF TAX RETURNSheavynot looked atTIME IN BUSINESSheavysomeMONTHLY BANK DEPOSITSsomeheavyDEPOSIT CONSISTENCYnot looked atheavyINDUSTRY AND STATEsomeheavy
The same business, read two different ways. A bank decision is built on credit, collateral and filed accounts; a revenue-based funder builds it on the money moving through your account. That is the whole reason a bank decline says very little about whether you can be funded.

What a revenue-based funder reads instead

Recurring contracts are close to ideal underwriting material. Monthly billing to the same commercial clients produces a deposit pattern with very little noise in it.

The classic use is winning a contract you cannot immediately staff — hiring and equipping a crew weeks before the first invoice settles. That gap is what the funding is for.

Client concentration will be examined. A single anchor contract carrying most of your revenue is the real risk here, not the absence of collateral.

What to have ready before you apply

Six months of business bank statements.

Your contracted monthly revenue and roughly what share the largest client represents.

Payment terms on your major contracts, which explain the gap you are funding.

Sources

Related questions.

Can I fund a new contract before it pays?
Yes — hiring and equipping ahead of the first invoice is one of the most common uses in this industry. Underwriting is on existing deposits, so the offer reflects the business you already have.
Does one large client hurt my application?
It changes it. An anchor client above half of revenue usually means a smaller amount or a higher rate, because losing it is the risk being priced.
Is residential or commercial cleaning easier to fund?
Commercial, generally. Contracted monthly billing is more predictable than residential work, even though residential often pays faster.

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