SBA plumbing and HVAC loans by the numbers
There is no HVAC-only industry code. Plumbing, heating and air-conditioning contractors share one, so every figure below covers both trades. From FY2015 through June 30, 2026, the SBA approved 9,776 of these loans under 7(a) and 998 under 504, net of cancellations.[1]
SBA plumbing and HVAC contractor loans (NAICS 238220)
| Measure | Figure |
|---|---|
| Median 7(a) loan, FY2015 to June 2026 | $138,000 |
| 7(a) loans made through SBA Express | 55.1% (all industries: 42.7%) |
| 7(a) loans that are revolving lines | 40.4% (all industries: 28.6%) |
| Buying an existing company (FY2019 on) | 12.6% of 7(a) loans, median $729,500 |
| Company purchases with terms of 25 years or more | 3.5% |
| Loans with no franchise code | About 96% |
Source: SBA 7(a) and 504 FOIA loan data as of June 30, 2026. NAICS 238220 combines plumbing, HVAC, mechanical, sprinkler and refrigeration contractors; the SBA file cannot separate them.
Most loans in this trade are small lines and Express loans for running the business. Purchases are a different animal: much larger, and almost always on 10-year terms, which points to deals made of goodwill, trucks and equipment, with the shop leased or bought separately.
Three ways into a company
- Buying a company as a first-time owner is an Initial Acquisition. At least 10% down that can't be waived, and the seller's history must show 1.25 coverage.[2]
- Buying the company you work for after 24 months or more, from a single owner selling 100%, is an Owner Buyout. Same 1.25 floor, different equity rules.
- Starting your own company is a start-up, judged on projections, often with a term loan for what lasts and a line of credit for slow months.
An existing owner with two full fiscal years under current ownership buying 100% of the stock of another company in the same industry group can qualify as a Business Expansion at a 1.15 floor. Plumbing and HVAC share one code, so an HVAC company buying a plumbing company's stock fits that test. Buying the other company's assets is an Initial Acquisition at 1.25.
Most of the price is goodwill, and the debt is capped at the valuation
A service company's value sits in its customers, its maintenance agreements and its people. A 7(a) loan can finance those intangibles in a purchase, on a term of no more than 10 years. Two rules keep the price honest.
- The lender orders an independent business valuation whenever the Business Purchase Price is above $350,000, and total debt, including any seller note that isn't on full standby, can't exceed it.
- If you pay more than the valuation supports, the SBA says the difference must be made up with equity.
In the book's main example, Tyler Grant, an operations director at a home-services company for 13 years, buys a residential HVAC company with 14 trucks, 22 technicians and about 1,900 customers on maintenance agreements. The price is $1,800,000, and $1,250,000 of it is goodwill, the customer list and the service agreements. The valuation comes in at $1,850,000, so his $1,800,000 loan fits under it. Recurring agreement revenue helps only through the seller's past cash flow; it doesn't lower the 1.25 floor, and projections can't be used to meet it.
Trucks and tools count at a discount. Agreements count for nothing.
For the SBA's fully secured test, real estate and equipment count at set discounts, inventory and receivables at only 10% of book value, and intangibles not at all. The SBA doesn't require a lien on a vehicle that already has one or is worth $20,000 or less when the loan number is assigned, so a fleet splits into trucks that get liened and trucks that don't.
How a lender counts Tyler's collateral
| Asset | Price allocation | Counted toward fully secured |
|---|---|---|
| 8 trucks worth more than $20,000 each (liened) | $290,000 | $145,000 (50%) |
| 6 trucks worth $20,000 or less | $60,000 | Not liened |
| Tools and equipment | $120,000 | $60,000 (50% of book value) |
| Parts and equipment inventory | $80,000 | $8,000 (10%, lien required) |
| Goodwill, customer list, service agreements | $1,250,000 | Nothing |
| Total against a $1,800,000 loan | $1,800,000 | $213,000; shortfall $1,587,000 |
The SOP sets used equipment at no more than 50% of net book value, or 80% with an orderly liquidation appraisal. Applying that rate to trucks is an interpretation; your lender decides.
For detailed calculations and real examples, see the FUNDED HVAC Guide.
A gap that size is normal for a service company. When the loan isn't fully secured, the lender must take available equity in personal real estate the owner holds alone, though not where the equity is under 25% of the home's value, and Tyler's lender takes a lien on his home. On a Standard 7(a) loan that isn't fully secured, the SBA also requires life insurance in the amount of the shortfall for a business that depends on one owner. A shortfall alone is not a reason to decline the loan. Hazard insurance is required on pledged collateral for 7(a) loans over $50,000, so get quotes on the fleet early.
The contractor license and the 90-day rule
In many states, a contractor license runs through a qualifying individual who passed the exams and met the experience rules. In a small company that is often the owner who is selling. Who can qualify the license after closing, whether a licensed employee can serve, and how long a change takes are all state law, and the SOP says nothing about them. Most states and some localities also require plumbers to be licensed.[3]
Three SBA rules collide with that question:
- The 90-day rule. The lender must have evidence of every license the business needs within 90 days after the loan finishes funding, and it can't sell the loan until it does.
- The seller's exit. In an Initial Acquisition, the seller can't stay as an owner or employee. A consulting contract of up to 24 months is the limit.
- The 5-day escrow. An SBA closing escrow can last no more than 5 business days, so the loan can't sit in escrow while a license change is reviewed.
Whether a consulting seller can legally remain the qualifier during those 24 months is a question for your licensing board, and many lenders want a permanent answer that doesn't depend on someone on their way out. Your lender may also need to document that the ownership structure meets your state's licensing rules. Tyler isn't a licensed contractor, so before he signs he needs a qualifier plan his state allows: himself, if he can get licensed in time, or a licensed employee.
One credential doesn't move at all. An HVAC technician who handles refrigerant must hold an EPA Section 608 certification, and it belongs to the person, not the company.[4] If technicians leave, their certifications leave with them.
Owner dependence and key technicians
A service company earns money when a qualified technician is on a call. The SBA requires the lender's credit memo to describe the management team and how daily operations will be run. Many lenders go further and ask who the key people are (the service manager, lead installers, top technicians, the dispatcher), how long they have been there, and whether the selling owner is the one doing the hardest work or holding the biggest customer relationships.
Pay is part of that risk. The median HVAC mechanic inside plumbing and HVAC contracting earned $60,030 in May 2025, so a seller's payroll may sit below what it costs to keep or replace a good technician.[5] Build market wages into your own numbers, ask to meet key staff under a confidentiality agreement once the deal is firm, and put the seller's transition role in writing.
Down payment and seller notes on a purchase
For a first-time buyer, the SBA minimum is 10% of total project cost, and it can't be reduced or waived. A seller note counts toward it only on full standby, meaning no principal or interest for the life of the SBA loan, and limited sources like that can cover no more than half of the required injection. A temporary exception for veterans: from November 11, 2026 through September 30, 2027, the SBA has announced that an eligible veteran purchasing an existing business with a 7(a) loan may raise the full 10% from these sources (SBA News Release 26-117); ask your lender how it applies.
Tyler needed $200,000. He put in $100,000 of cash, and the seller carried $100,000 on full standby, which uses the entire half cap. A standby note also gives the seller a reason to help with the handoff, because it pays nothing until the SBA loan is repaid. Many lenders ask for more than the minimum.
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Tyler's deal, start to finish
Every number below comes from the book's worked example. The interest rate is illustrative.
Buying an asset-light HVAC company through SBA 7(a)
| Item | Tyler's deal |
|---|---|
| Receipts on last tax return | $4,200,000 |
| Purchase price | $1,800,000 |
| Independent business valuation | $1,850,000 |
| Closing and valuation costs / working capital | $40,000 / $160,000 |
| Total project cost | $2,000,000 |
| Equity injection (10%) | $200,000: $100,000 cash + $100,000 seller note on full standby |
| SBA 7(a) loan | $1,800,000, 10 years |
| Annual debt service at an illustrative 7.50% | $256,396 |
| Documented cash flow, after a market salary for a general manager | $410,000 |
| Debt service coverage | 1.60 (floor 1.25) |
| Global (household) coverage | 1.39 (floor 1:1) |
| Upfront guaranty fee, FY2027 | $48,125 on the $1,350,000 guaranteed portion |
The shop is leased and no real estate is pledged, so the SOP requires no environmental review, though his lender may still ask. The $1,800,000 price is under the $3,000,000 line where a Quality of Earnings report would be required.
For detailed calculations and real examples, see the FUNDED HVAC Guide.
Buying the company you work for
Rosa Delgado has run the service department of a $2,400,000 HVAC company for 30 months, and she holds a contractor license and her EPA 608 certification. When the single owner retires, he sells her 100% of the stock for $900,000. Because she has worked there more than 24 months, the SBA treats it as an Owner Buyout, and Rosa and the company are co-borrowers.
Owner Buyout vs Initial Acquisition
| Rule | Owner Buyout (Rosa) | Initial Acquisition (Tyler) |
|---|---|---|
| Equity measured on | Purchase price | Total project cost |
| Can the lender reduce or waive the 10%? | Yes, if the business has enough liquidity | No |
| Coverage floor | 1.25 | 1.25 |
| Quality of Earnings report | Not required | Required at a Business Purchase Price of $3,000,000 or more |
| Seller staying on | Not covered by the 24-month consulting cap; whether the seller must stay and guarantee is your lender's call | May not stay as an owner or employee; consultant up to 24 months |
The structure decides the category. If a new company buys the business's assets instead of its stock, the deal is usually underwritten as an Initial Acquisition.
For detailed calculations and real examples, see the FUNDED HVAC Guide.
Rosa puts in $90,000 in cash, 10% of the price, and borrows $810,000 over 10 years. The company's documented cash flow of $175,000, after a market salary, covers $115,378 of annual debt service 1.52 times, and her household test comes to 1.17.
Her lender could have waived the equity. That would have raised the loan to $900,000 and cut coverage to 1.37, and it comes with a condition: a lender that waives the injection can't put dedicated working capital in this or any other 7(a) term loan within 90 days. In a business that runs on seasons, map the cash needs for the 90 days after closing before you accept a waiver. A stock purchase often helps with the license, since the company stays the same legal entity, but your state still decides whether a change of owner or qualifier needs a filing.
Starting your own company with SBA Express
Sam Okoye has worked as a technician for 11 years and wants his own residential service company. His lender approves two SBA Express loans the same day: a $200,000 term loan over 10 years for the trucks, tools and starting cash, and a $100,000 line of credit with a 2-year draw period and a 3-year term-out. SBA Express loans can total $500,000 or less, and the SBA guarantees 50% of each.
Sam's start-up
| Item | Amount |
|---|---|
| Two new trucks | $110,000 |
| Tools and recovery equipment | $45,000 |
| Opening inventory | $25,000 |
| Working capital | $42,500 |
| Total project cost | $222,500 |
| Sam's equity (about 10%) | $22,500 |
| SBA Express term loan | $200,000, 10 years |
| SBA Express line of credit (outside the project) | $100,000 |
| Debt service at illustrative rates (7.50% term, 9.00% line on an average $50,000 drawn) | $32,988 |
| Projected coverage, year 1 / year 2 | 0.91 / 1.94 |
| Upfront guaranty fee, both loans together | $4,500 |
Both loans run longer than 12 months and were approved within 90 days of each other, so they combine for the fee. The trucks the loan buys are worth more than $20,000 each, so the lender takes a first lien on them.
For detailed calculations and real examples, see the FUNDED HVAC Guide.
A start-up is judged on projections. The SOP's start-up standard is 1.15 coverage within 2 years, and Sam's lender used it; the SBA Express rules themselves ask for a reasonable assurance of repayment rather than a number. Year one falls $2,988 short, and his $42,500 of working capital covers it. The line is for timing, borrowing in a slow shoulder month and repaying in a busy one. Using it to cover a loss means borrowing with no busy month coming to pay it back.
On equity, the SOP points two ways. Its start-up section calls for at least 10% of project cost, while its SBA Express section leaves whether to require equity, and how much, to the lender. Plan on 10% and treat anything less as your lender's choice. Sam also has to get the new company's contractor license within 90 days after the loan funds; his own 608 certification doesn't give the company the right to contract for work.
Which SBA program fits an HVAC or plumbing deal
Which program fits which deal
| Your deal | Usual program | Minimum you put in |
|---|---|---|
| Buying a company as a first-time owner | SBA 7(a), 10 years | 10% of total project cost, can't be waived |
| Buying the company you work for (Owner Buyout) | SBA 7(a) | 10% of the price (your lender may reduce it) |
| Buying 100% of the stock of another company in the same group | SBA 7(a) | 10%; your lender may reduce it |
| Starting a company | SBA 7(a) or SBA Express, often with a line | About 10% (on Express, the lender decides) |
| Buying or building a shop and warehouse | SBA 504 | 10% for an existing business, 15% for a new one |
An HVAC or plumbing shop is not special purpose property, so the higher 504 tiers don't apply. Goodwill, inventory and working capital can't go in a 504.
For detailed calculations and real examples, see the FUNDED HVAC Guide.
Environmental review comes into play only when a building or leasehold is pledged. Specialty trade contractors are not on the SBA's list of environmentally sensitive industries, so a pledged shop follows the loan-size path: an Environmental Questionnaire at $250,000 or less, and a questionnaire plus a Records Search with Risk Assessment above that, unless the site's past uses call for more. The code decides it: a company that also delivers heating oil, or is coded as commercial refrigeration repair, starts with a Phase I.
How to finance an HVAC or plumbing company with an SBA loan
- 1
Pick your category
A first-time purchase is an Initial Acquisition at 10% of total project cost. Two years on the payroll and a 100% stock purchase from a single owner can make it an Owner Buyout, with equity on the price.
- 2
Settle the license before you sign
Ask your state who can qualify the license after the sale and how long a change takes. Every required license must be in place within 90 days after the loan funds.
- 3
Test the price against the valuation
Total debt can't exceed the independent valuation, and any price above it is your equity. Recurring agreement revenue counts only through past cash flow.
- 4
List the fleet and equipment
Record each truck's value, liens and condition. Trucks worth more than $20,000 get liened, and used equipment counts at 50% of book value unless you pay for an appraisal.
- 5
Ask about your home early
Goodwill and service agreements earn no collateral credit, so the lender must take available equity in personal real estate you own alone, unless the equity is under 25% of its value. Ask whether life insurance will also be required.
- 6
Meet the key people
Learn who holds the licenses and certifications, how long the top technicians have been there, and whether the seller does the hardest work. Price their pay at a market wage.
- 7
Run coverage twice
Divide documented cash flow by annual debt service for the business test, then run the household global test at 1:1 or better.