What financial products do I need as a plumber?

Starting or expanding your plumbing business would be much harder if you had to shoulder all the costs yourself. Fortunately, there are plenty of financial products for plumbers that will help get your business off the ground, allow it to grow and keep it running smoothly.

What is a financial product?

A financial product helps you manage your own or someone else’s money. Common financial products include business bank accounts, loans and insurance. Most firms benefit from one or more of these products.  

What types of financial products are available?

As a plumber, you’ll need access to financial products that help you:

• Manage cashflow – this includes business accounts and business savings accounts

• Protect your company and its assets – examples include van insurance, public liability insurance and goods in transit insurance

• Fund big projects – for instance, business loans, credit cards and leasing products

Financial products for businesses offer benefits not seen in equivalent products aimed at private individuals. For instance, unlike many business bank accounts, personal current accounts don’t tend to allow you to upload receipts to your account.

What financial products does a plumber need?

Whether you’re new to the plumbing trade or building up an existing business, you’ll need certain financial products. Here’s a rundown of the main ones and the pros and cons of each:

For managing cashflow:

Business bank accounts

A business bank account enables you to record all transactions and typically comes with an overdraft.

Pros:

• Includes handy benefits, including accountancy software so you can work out your tax and National Insurance liabilities

• May feature facilities to upload receipts and record invoices

• Could boost your business credit rating, making it easier to get business loans

Cons:

• May come at a cost – for example, some charge £12.50 a month or more

• You may need to switch accounts if your business requirements change

• There are rules about taking money out of your account for personal use

Business credit cards

Business credit cards work like personal ones, making them handy for covering unexpected expenses.

Pros: 

• A convenient way to keep business transactions separate from personal ones

• Perks include cashback, discounts, air miles and 0% deals

• They can boost your business credit score

Cons:

• Access to higher levels of credit can lead to debt that’s hard to repay

• You typically need a good to excellent credit rating to apply successfully

For protection:

There’s a wide range of business insurance policies that are suitable for plumbers, including the following:

Public liability insurance – covers injury or damage to another person or their property

Employers’ liability insurance – as above, but covers your staff and is a legal requirement if you have anyone working for you who’s not immediate family 

Professional indemnity insurance – covers disputes if you’re accused of not doing your job properly

Tool insurance – covers damage or loss of valuable tools

Pros:

• Can save you a lot of money if you need to claim

• Some clients will insist on you having certain insurance

• Fulfil a legal requirement if you have staff

Cons:

• Expensive if you never claim

• Some have exclusions that you need to watch for

• Excesses can be high

Mobile phone insurance

Mobile phone insurance protects your phone against loss or damage while you’re out and about. Given the nature of your job, it’s probably invaluable. 

Pros:

• Guaranteed replacement if your phone is lost or damaged

• Good policies may cover water damage

• Cheaper than needing to buy a new phone if your phone breaks, is lost or stolen

Cons: 

• Cover can be expensive, as can excesses

• Your phone may be covered if you have business contents insurance

• You may not get a next-day replacement

For funding big projects:

Business bank loans 

Business loans can be secured or unsecured and can be a great way to help fund company growth plans.

Pros:

• Quick access to finance, typically ranging from £1,000 to more than £1 million

• Some lenders offer flexible loan terms of from one month to more than five years

• Typically better interest rates than you’d get with online lenders and credit cards

Cons:

• Strict eligibility criteria

• Can take time for applications to be approved

• Risk of losing your company or being declared bankrupt

Other funding options

Crowdfunding 

With crowdfunding, you raise money via social media portals and websites. Individual investors pitch in an amount in exchange for a share of any profits made or for rewards, such as discounts on future work (typically offered to commercial investors).

Peer-to-peer lending

Peer-to-peer lending is like crowdfunding, but lenders earn interest rather than take a share of your profits. The risk for them is that they may receive no return if your firm folds.

Angel investors

Think Dragon’s Den. Angel investors are individuals or groups who invest their time and money in your business in return for shares. They are typically an option for larger firms with a good track record or smaller ones with a stand-out innovation. You likely need to be active on social media and a fluent networker to snare a potential investor.

More financial products to consider

The list of financial products that can help a growing plumbing firm doesn’t end with those featured above. You might also like to consider the following:

Trade accounts 

A growing plumbing business will inevitably need more tools, equipment and parts. Suppliers know this, which is why many offer trade accounts. In addition to offering purchase discounts, they often provide secure online ordering portals that record account statements, invoices and even stock levels.

Customer payment plans

The impact of the cost-of-living crisis on plumbers can’t be underestimated. Customers feeling the pinch are less likely to get plumbing problems fixed or upgrade existing installations. Firms offering monthly repayment plans backed by Financial Conduct Authority-registered lenders can attract more business. 

Equipment finance

Equipment finance works in a similar way to car finance. It may be useful if you move into a specialist area where expensive equipment is needed, such as heavy goods vehicles or solar panels.

Can the government help?

You may be eligible for financial help from the government in the form of a grant or a loan. You’ll need to produce financial records going back three years and have a strong growth plan to get either. Many grant and loan schemes are run on a local level.