Zaid Rahman: 3 credit card considerations for plumbing contractors

While most plumbers may like to think that they’re mostly serving routine maintenance or installation customers, the most common nature of those calls is likely panicked customers with a burst pipe, a backed-up toilet or another emergency that needs a response ASAP.

To tackle these emergency problems, many plumbers often cover the cost of a quick trip to the hardware or plumbing store for a customer in advance — but this practice is cutting into the already-stretched bottom line that many plumbers face. According to one recent survey, nearly 50% of plumbers believe that cash flow problems are the biggest issue facing the industry today. In a highly competitive landscape that often causes diminishing profit margins for already-struggling businesses, that’s not a good thing. Especially if you’re a large, distributed plumbing operation, this practice can be akin to a death by a thousand cuts for your business — $50 here, $100 there — it adds up and ultimately cuts into profit margins.

The pandemic hasn’t made things any easier; canceled appointments, supply chain issues and a lack of skilled labor are cutting into the cost of doing business. Ensuring your business thrives even if payments don’t come in on time often requires a multi-pronged approach, and a small business credit card may be one of them.

That said, many of these cards aren’t covered by the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (Credit CARD Act), meaning a credit card company can raise the interest rate to a higher default rate if the cardholder is even one day late on a payment. This spells trouble for plumbers who do their best to pay their business expenses on time but often fall victim to late payments. So what’s the solution? Here are some key considerations to keep top of mind while evaluating the right card for your plumbing business.

Supported workflows

Technology and automation can be two of the best things to ever happen to a plumbing business… provided your credit card can support those new workflows. Workflows that speed up billing and address slow payments can be business-saving implementations, and ideally, your business credit card should help you make that investment.

It may seem counterproductive to spend money to automate processes you could just do yourself, but investing in invoicing services and bookkeeping software that help you settle your accounts enables you to focus on tasks more critical to your business. This, in turn, ensures you’ll be able to get your invoices paid on time — and that you’re tracking those that aren’t so you can tack on late fees as an incentive to get that payment sooner rather than later.

Workflows that speed up billing and address slow payments can be business-saving implementations, and ideally, your business credit card should help you make that investment.

Longer interest-free credit periods

The ideal credit card for any plumbing business is one that accommodates the inevitability of late payments in both their payment schedules and their policies. Not only is this immediate flexibility great, but it can also ensure that plumbing companies can improve their credit in the long run — and since the capital you can borrow is directly tied to the state of your credit, that’s a great thing if you plan to grow your business.

This is another instance where implementing new technologies into your workflows can come in handy. While automating payments or using the latest tech to speed up the process of doing business through automatic invoicing and payment reminders — and maybe even financing applications, depending on your plumbing business’s sector — you’re increasing your cash flow overall and thus affording yourself the chance to build better credit and expand. More plumbers have started adding these technologies to their workflows in the last year or two, and that’s just a taste of what we can expect to be possible in the years to come.

Different credit eligibility factors

Right now, small business credit eligibility is often based solely on the owner’s individual credit. This default rule is problematic for several reasons – it disproportionately impacts minority-owned businesses and business owners whose credit may be less than non-minority-owned businesses — and can be especially disadvantageous for plumbers if their credit has taken a hit due to nonpayment issues related to customers.

The ideal credit card for a plumbing business should base its loan amounts and rates around a credit eligibility assessment that takes information from sources both public and private into account when assessing the company’s true creditworthiness — clients, taxes, historical transactions, internal financial data and more. Looking at that entire history is the right way to go to ensure a credit card policy is fair and equitable for a plumbing business.

While the solvency of your plumbing company may be increased by opening the right credit card, beware: There are always new small business credit cards hitting the market that feature shiny bells and whistles — everything from no cash advance fees to bonus cash-back offers and locked-in interest rates. While you should be sure to not be blinded by the shine of those offers, keep an eye out as there may be something that comes around that could be a real boon for your company. Remember to think in the long term when choosing a credit card, and avoid getting in a bad spot for a short-term sign-on benefit.