The current state of the construction industry proves an interesting theory about growth. Even though construction spending has increased over the past few years, costs have increased for construction contractors as well. It seems that certain industry-wide challenges will simply never disappear, while new challenges have emerged from rising standards and demands. There might be no business that is more in need of additional business funding than construction, but only from business lenders that actually understand how to solve their uniquely daunting problems. Appropriate products from such business lenders must be highly accessible, primarily due to the various time constraints and hectic schedules of the average contractor.
With a correctly-timed extra supply of working capital, the aforementioned challenges do not have to prevent construction companies from serving their customers and maintaining dependable reputations. Here are three reasons working capital loans may be the solution they’ve been looking for:
1. Labor Shortages
If you were to ask the entire construction industry about their biggest hardship, the most popular answer would probably be related to labor. Many construction companies struggle to find qualified workers, which is especially worrisome in a business that thrives on young, able-bodied employees. Older construction workers tend to retire earlier than other industries, so it’s safe to say that contractors must put in an excessive amount of effort to enlist new recruits from younger generations. This leaves contractors with at least two potential solutions: They can either devote extra time looking for qualified workers or establish comprehensive training programs for new recruits with little or no experience.
Each option, however, comes with a cost. Every day counts for small businesses, so all the time spent searching for new employees takes time away from projects getting underway. Rather than discussing new opportunities or signing contracts, the contractor must focus on building a bigger team. This widens the company’s already-widened business cycle even further. The second option would essentially force the contractor to pay for employees who aren’t contributing to revenue. If anything, the company would stand to lose revenue since training new workers often hinders productivity.
Thankfully, either option’s effect on cash flow can be dramatically offset with an infusion of working capital from an affordable working capital loan. Unlike other business lenders, working capital loans from United Capital Source do not require perfect cash flow or personal credit. They can be accessed when funds are low or when you are awaiting compensation. We can even offer terms that postpone your largest payments until the end of an upcoming project or after the signing of a new contract that compensates the company in phases.
2. Delays In Productivity
This labor shortage is also directly related to the next challenge, which is stagnation in productivity. Projects are becoming increasingly more complex but they continue to be delayed by the same obstacles that have plagued the industry for decades. Examples include insufficient time devoted to planning or scheduling, a lack of communication between stakeholders on projects, or waiting until the last minute to order equipment and/or supplies. It appears that construction companies are underestimating the amount of time it takes to accumulate all the requirements for a project to begin. This just puts more time between the acquisition of such requirements and compensation, which could make it very difficult to pay employees in the meantime.
Two types of working capital loans come to mind for this dilemma. One is a standard, short-term working capital loan that, if you choose a business lender like United Capital Source, could be accessed well before a project is scheduled to begin. This would allow the company to purchase equipment and supplies despite having no revenue flowing in for several weeks. The second type is accounts receivable factoring, in which the company would sell the newly-signed account to a business lender, or “factor,” for a discount price. Accounts receivable factoring shortens your business cycle from weeks or months to just a few business days. You can have some of the money distributed right away to cover business expenses and payroll and save the rest for the middle or end of the project.
3. Efficiency Of Advanced Technology
The construction industry is notoriously slow when it comes to incorporating new technology. This is yet another explanation for the aforementioned productivity issues. While the labor shortage is by no means impenetrable, many companies have concluded that they should stop focusing on recruiting and instead figure out how to get more work done with less people. Some of their competitors have already that step by investing in drones, 3D printing, or autonomous equipment.
Now that the worth of these investments has been repeatedly proven, you can count on United Capital Source to help you level the playing field. For this kind of situation, we might recommend equipment financing or a business term loan. Traditional repayment systems would likely work best due to the money you’d be saving and the increased amount of jobs you’d be able to take on.
You could argue that all three challenges on this list stem from a single problem: not enough construction contractors are pursuing additional business funding. If this was the case, neither challenge would be as widespread as it is today. Working with a company like United Capital Source will surely teach you that the more common a problem is, the more likely you are to find a solution.