An Overview of Small Business Loans for Construction
Even for Construction Contractors, construction projects do not always turn out as expected. There may be unforeseen costs, such as the must buy supplies or equipment. The project’s commencement date may be postponed by a variety of factors, including new investors, county regulations, and bad weather. In the construction business, payment to contractors is often delayed until specific project milestones are reached, adding even more strain to cash flow. Benifyt can help contractors and construction companies get the business credit they need to finish projects on schedule and pay for operating costs in the interim by providing access to business loans.
We will address all the following queries in this tutorial, plus more:
What Are Loans for Construction Companies?
How Do Construction Company Business Loans Operate?
What Benefits Can Construction Companies Get from Business Loans?
What Drawbacks Do Construction Companies Have When Using Business Loans?
Who Is Eligible for Loans for Construction Businesses?
How to Apply for Business Loans for Construction Contractors:
What Happens If a Contractor Business Loan Application is Rejected?
What Are Loans for Construction Companies?
Construction loans designed to support construction contractors’ periodic expenses and cash flow cycles are known as construction business loans. These small business loans can not only pay for greater goods and urgent demands, but they can also fill revenue gaps until payments are received.
How Do Construction Company Business Loans Operate?
let us say a business owner needs some extra cash to buy more supplies, new equipment, or cover payroll until the next phase of a project is completed. The logical solutions to these business problems in the construction industry is a short-term working capital loan or business loan.
Usually, the decision depends on how long it will take to repay the loan, as well as the likelihood that you will need a construction loan again soon. Running costs and cash flow shortages are common in construction companies. Thus, a business construction loan would prevent you from applying for additional financing whenever you cannot cover short-term expenses.
Maybe you just finished a project and want to start the next one. However, compensation is not expected for several weeks. In this case, it may be useful to consider accounts receivable factoring. A small business loan provider will purchase the account at a discounted rate and then take over the responsibility of collecting from your client. Once payment is received, you will receive the remainder of the original sale, less expenses.
It is important to note that construction loans can be designed to solve several problems. You may need to hire more staff, pay vendors in advance, or obtain special permits for the same project. We can adapt your loan amount and terms to each contractual expense of your business, even if they occur at different intervals.
What Benefits Can Construction Companies Get from Business Loans?
Construction companies grow by taking on more and more complex but profitable projects. Construction loans allow you to say yes when your cash flow would force you to say no. In other words, you should not let rising costs, long repayment gaps or late start dates stop you from embracing critical opportunities.
A lack of cash flow can make it difficult to retain employees and build loyalty. This is one of the biggest challenges facing the construction industry. With a construction loan, you ensure that you can always pay your employees on time, even if projects are delayed. A larger team enables larger projects to be implemented.
You do not have to settle for perfectly steady cash flow, a sizable bank balance, or excellent personal credit. You can still get funding within days, even if most of your working capital is at risk.
That is why many contractors take out small business loans during the slow season so they can save money to prepare for the busy season. In this case, we do not recommend a construction loan that requires a significant payment soon after the money is distributed.
What Drawbacks Do Construction Companies Have When Using Business Loans?
Although there are many benefits to getting a construction loan, many small business owners are reluctant to take on too much debt. As noted earlier, requirements of construction and contracting partners can be inconsistent. Because many factors are out of your control, it is difficult to predict when you may receive payment for services. Adding a loan payment can in some cases do more harm than good.
If your business credit or personal credit is suboptimal, the best building SBA programs may not be available. The SBA usually requires excellent credit because you get the best interest rate and loan terms of up to 25 years in return. Some programs allow real estate to be used as collateral for an SBA loan.
Who Is Eligible for Loans for Construction Businesses?
Annual Revenue: $180k
Credit Score: 550+
Time In Business: 6+ months
How to Apply for Business Loans for Construction Contractors:
The documentation needed for the application procedure varies based on the product you have selected. Funds can be authorized and disbursed for most products in as little as three business days. Here is how you apply to get started:
Step 1: Choose the right product
The first step is to choose the most reasonable solution to the problem. This should require proper research as each product is designed to be used for different cost and cash flow cycles. Do you want to cover short-term or long-term expenses? What is the billing schedule for the project? Considering your financial goal also helps us determine the lender and terms that best suit your needs.
Step 2: Gather Your Documents
Here are the documents and information required for all construction loan types:
Driver’s license
Voided business check
Bank statements from the past three months
Invoice for equipment (for Equipment Financing)
Credit card processing statements from the past three months (for Merchant Cash Advance)
Accounts Receivable Aging Report (for Accounts Receivable Factoring)
Accounts Receivable (for Accounts Receivable Factoring)
Debt Schedule (for Accounts Receivable Factoring)
SBA Loans require additional documents and information. To learn what is needed for the SBA Loan application, visit our SBA Loan page.
Step 3: Fill Out Application
You will start the application handle by calling us or filling out our one-page online application. Either way, you will be inquired to enter the information from the past area alongside your wanted financing sum.
Step 4: Speak to a Representative
After submitting your application, a representative will contact you for a personal consultation to explain the available options, repayment structure, interest rates, terms, and conditions. That way, you do not have to worry about surprises or hidden costs during the repayment process.
Step 5: Receive Approval
When you are approved, the funds should appear in your bank account within 1-3 business days. SBA loans typically take 3-5 weeks to receive funding.
What Happens If a Contractor Business Loan Application is Rejected?
After evaluating the financial situation of your business, the lender may conclude that a construction loan would do more harm than good to your cash flow at this time. In this case, we may recommend another means of financing your small business, such as a business credit card or even a personal loan. Business credit cards and personal loan options are usually much easier to obtain than small business loans. When you apply for a business credit card, you may not get the credit limit you need, but you can use the credit card as a tool to improve your credit score
