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Financing FAQs, answered

January 29, 2021 -  By
Stand-on mower Getty Images Plus/Getty Images)

Money moves Financing mowers and other equipment with dealers or the bank can help free up cash flow. (Photo: photovs/iStock / Getty Images Plus/Getty Images)

For Clean Scapes, the process of financing equipment has turned into a well-oiled machine, similar to the mowers the company purchases.

“Landscaping is a seasonal business, so financing really allows you to smooth out your cash flow, especially when you’re growing. It helps you plan for what you’re going to do in the future,” says Damien Matherne, CFO of Clean Scapes. “It allows you to pay off things easier and quicker and gives you greater flexibility.”

Clean Scapes, based in Austin, Texas, is a $70 million company that ranked at No. 38 on the 2020 LM150 list. It provides about 45 percent construction services and 55 percent maintenance services to a 100 percent commercial clientele.

Matherne and Ivan Giraldo, president of Clean Scapes, share their advice for working with banks and dealers to finance equipment.

LM: Could you explain your process for financing mowers?

DM: Over the years, we’ve developed a program where we have an equipment line of credit that we use through our bank. Then, we look at dealer financing as a measuring stick to see where we can get from a better deal. Our goal is to finance all major equipment and vehicles on an annual basis and fund the rest of the operation as best we can with our cash flow.

We’ve got an asset-based line of credit as well as an equipment line, so we estimate how much equipment we’re going to need for the rest of the year and request credit for that amount.

IG: At the very beginning, we financed mainly through dealers, but once we started growing and improving our revenue, we decided to create a line of credit.

LM: How has this approach made the operation more efficient?

DM: Every dollar of interest is something that hits the bottom line, so it allows us to be flexible and establish relationships with our dealerships. It allows us to own our own destiny and make better financial decisions for the company.

LM: What advice do you have for other landscapers looking to finance mowers?

IG: If the terms are correct, companies should finance their equipment. A lot of companies, especially small companies, are afraid to finance, and they use all their cash to pay cash (for equipment). That puts a lot of other stress on the company by creating issues such as not having a lot of cash flow.

DM: When you’re looking at the loan and you’re a small company, you need to look at the origination fees, the initiation fees and the total cost of the loan because that needs to be a consideration as far as the interest cost. Look at the life of the loan and average that out to understand what your true interest rate is. Establish credit with a partner, whether it’s a bank or something else. If you’re just getting started, you need to focus on one established credit line with that individual or that company, and then as you grow, you diversify and give yourself additional options so that you can leverage one option or the other. Just like with anything else in business, you’ve got multiple opportunities to get credit.

Keep it simple, keep it clean and as a business owner, realize that banks like to lend money when you don’t really need it. It’s cheaper when you don’t need it. (When you do need it), they see risks, so they have more hesitation and the cost is more.

Sarah Webb

About the Author:

Sarah Webb is Landscape Management's managing editor. She holds a bachelor’s degree from Wittenberg University, where she studied journalism and Spanish. Prior to her role at LM, Sarah was an intern for Cleveland Magazine and a writing tutor. She can be reached at swebb@northcoastmedia.net.

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