Financing for construction companies and construction subcontractors isn’t usually easy because lenders often look at construction financing more cautiously than for other types of business. The reasons are that construction relies substantially on credit, and payment collection can sometimes take weeks or months. Plus, there are substantial risks involved in the building industry. Yet, construction companies need to pay for materials, equipment, and labor before getting funds to cover their costs. Thus, construction financing is a crucial aspect of succeeding in a construction business.
Ways to Get Construction Financing
Construction financing can be obtained these ways:
Work with your suppliers. Ask them for 30 to 60-day payment terms. Suppliers will be more willing to do this as you build a track record of payment performance.
Construction factoring. A factoring company can finance invoices that may be slow-paying and provide your company with an advance payment.
An SBA loan. The Small Business Administration provides Microloans for $50,000 or less to companies that qualify or SBA 7a loans for larger loan amounts. The SBA guarantees loans for participating banks, thus allowing them to more freely provide loans.
Merchant cash advance. A merchant cash advance can typically be secured easily and funded quickly.
Business owner resources. Many construction companies generate financing through home mortgages, retirement plans, personal credit cards, and savings accounts.
Friends and family financing. Many enterprises get financial assistance from friends and family members.
How to Qualify for Construction Financing
Construction financing qualifications include:
A good personal/business credit score and solid credit history including the personal and business debt history. A lender will look at how much the income the enterprise generates to cover existing and new debts.
Industry experience. A lender may review your industry experience and business reputation.
A down payment. Many lenders will require a down payment.
A detailed description of the construction plan.
Seek Expert Financing Assistance
Contact Capital Finance Partners to secure the funding you need. We offer a comprehensive portfolio of loan products to operate and grow your business.