The construction business is one of the most fastest growing industries due to the increase in demand of housing. The demand for office space will increase the need for retail buildings. Fortunately, there are construction business loans available for any small business owners that are looking to secure capital.
Contractors invest in materials and supplies before starting the new jobs. Small construction businesses can access the following loans that are available for funding:
Conventional lenders find it hard to give construction loans to new business owners because they lack a proven track record. Additionally, the construction industry is often seen as risky and unpredictable.
A business line of credit is a revolving loan that you can repay and over and over again to expand your construction business or cover any gaps in your cash flow. This type of loan is ideal for contractors that are in need of quick financing since you only are going to pay interest on the credit.
A business line of credit is suitable for the majority of most small construction businesses. You can draw the amount of funds you need and when you need them. This form of financing is quick unlike other loans in which you have to wait to apply and wait for a long period of time.
The total cost of a business line of credit depends on the annual percent rate (APR). The type of APR you get depends on the lender as everyone has their own terms and qualifications.
The maximum amount you can get with a business line of credit is $100,000. If you need more than that, you should seek other financing options.
For contractors that require growth capital and have predictable expenses, short term construction business loans are ideal. Short term business loans provide a lump sum amount that need fixed monthly or weekly repayments.
This loan is ideal if you need to make purchases immediately since you will get a lump sum that needs to be repaid immediately. You can use the loan to hire a new employee and pay the salary until you complete the project.
Below are some of the qualifications needed if you are seeking a short-term business loan:
If you do not repay this loan quickly, it can be expensive. It is also not suitable for those who have a lot of unexpected expenses.
With equipment financing, you can buy the important equipment you need for your business. The equipment is used as collateral for the loan, so it lessens the risk for the lender.
The following are qualifications needed for equipment financing:
You can use this to purchase essential equipment and replacing old equipment as well.
SBA guarantees SBA loans making them have low interest rates and long repayment terms. The downside is that this loan takes time to get funded because there is a lot of paperwork and underwriting involved. They are also difficult to qualify for.
To increase the chances of getting approved, you need to do the following:
It can be hard for contractors to get construction business loans because of how unpredictable the industry is. However, all the options above can help you acquire the working capital you need. You need to be sure you choose the right one for you.