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Intro To Business Loans For Construction Contractors
Construction projects don’t always go as planned. Additional expenses can arise, like equipment or supplies. A host of circumstances – from new investors to county codes to inclement weather – can delay the project’s start date. As if this didn’t put enough pressure on cash flow, contractors often do not get paid until they reach certain stages of the project. United Capital Source has access to business loans for construction contractors so they can obtain the resources to complete projects on time while covering operational expenses in the interim.
In this guide, we’ll answer the following questions and more:
- What Are Construction Contractor Business Loans?
- How Do Business Loans For Construction Contractor Work?
- What Are The Advantages of Business Loans For Construction Contractors?
- What Are The Disadvantages of Business Loans For Construction Contractors?
- How Do You Apply For Construction Contractor Business Loans?
- What If I’m Declined For a Construction Contractor Business Loan?
- Why Do Construction Contractors Need Financing?
- How Do Contractors Finance Construction Projects?
- How Long Can You Finance Construction Equipment?
- Can I Get a Construction Contractor Business Loan With Bad Credit?
What Are Construction Contractor Business Loans?
Construction Contractor Business Loans are business loans that are specifically geared towards the cash flow cycles and periodic expenses of construction contractors. In addition to covering short-term needs and larger purchases, these business loans can bridge gaps in revenue until compensation comes in.
Small business loans for construction contractors can take the form of:
How Do Business Loans For Construction Contractors Work?
Each of the products listed above can suit a different type of expense or cash flow issue. For example, let’s say you need a little extra cash to purchase more supplies or cover payroll until the next phase of the project is complete. Logical solutions to these dilemmas include a short-term Working Capital Loan or Business Line of Credit.
The decision typically depends on how long it will take you to repay the full amount, as well as the likelihood of needing extra cash again in the near future. Sudden expenses and cash flow shortages are prevalent in construction. Thus, a Business Line of Credit would prevent you from having to apply for more funding every time you’re unable to cover a short-term expense.
Maybe you’ve just completed a project, and you’re looking to ramp up for your next one. However, compensation isn’t scheduled to come in for challenging weeks. In this case, you might consider Accounts Receivable Factoring. The business loan provider purchases the account for a discount price and then assumes the responsibility of collecting from your customer. Once the payment is collected, you receive the remainder from the initial sale, minus fees. You can also decide if you want all the money upfront or a little bit at a time. To clarify, we can give you a certain amount of cash every two weeks, every month, etc.
It’s important to note that Construction Contractor Business Loans can be designed to solve multiple problems. You might need to hire more workers, pay vendors upfront, or obtain special permits for the same project. We can tailor your borrowing amount and terms to accommodate each expense, even if they occur at different intervals.
Contractor Business Loan Options Compared
| Loan types | Max Amounts | Rates | Speed |
|---|---|---|---|
| Merchant Cash Advance | $7.5k – $1m | Starting at 1.09 | 1-2 business days |
| SBA Loan | $50k-$10m | Starting at 5% | 3-5 weeks |
| Business Term Loan | $10k to $5m | Starting at 5% | 1-3 business days |
| Business Line of Credit | $10k to $250k | Starting at 8% | 1-3 business days |
| Receivables/Invoice Factoring | $50k-$10m | Starting at 5.8% | 1-2 weeks |
| Equipment Financing | Up to $5m per piece | Starting at 5% | 3-10 business days |
| Revenue Based Business Loans | $10K – $5m | Starting at 9% | 1-3 business days |
What Are The Advantages of Business Loans For Construction Contractors?
Construction businesses grow by taking on increasingly complex but lucrative projects. Thanks to Construction Contractor Business Loans, you can say “yes” when your cash flow would otherwise force you to say “no.” In other words, you don’t have to let mounting expenses, long gaps between compensation, or delays in start dates prevent you from accepting critical opportunities.
Cash flow shortages can make it difficult to retain employees and build loyalty. This is one of the biggest challenges of construction businesses. Construction Contractor Business Loans ensure that you’re always able to pay your employees on time, even when projects get delayed. After all, a larger team allows you to take on larger projects.
Also, you don’t need entirely consistent cash flow, a substantial bank balance, or excellent credit to be approved. You can still get funded in a matter of days, even if the majority of your operational funding is compromised.
For this reason, many contractors take out business loans during the slow season so they can maintain funds to prepare for the busy season. In this case, we wouldn’t offer a product that requires sizable payments shortly after funding is distributed.
What Are The Disadvantages of Business Loans For Construction Contractors?
Construction businesses grow by taking on increasingly complex but lucrative projects. Thanks to Construction Contractor Business Loans, you can say “yes” when your cash flow would otherwise force you to say “no.” In other words, you don’t have to let mounting expenses, long gaps between compensation, or delays in start dates prevent you from accepting critical opportunities.
Cash flow shortages can make it difficult to retain employees and build loyalty. This is one of the biggest challenges of construction businesses. Construction Contractor Business Loans ensure that you’re always able to pay your employees on time, even when projects get delayed. After all, a larger team allows you to take on larger projects.
Also, you don’t need entirely consistent cash flow, a substantial bank balance, or excellent credit to be approved. You can still get funded in a matter of days, even if the majority of your operational funding is compromised.
For this reason, many contractors take out business loans during the slow season so they can maintain funds to prepare for the busy season. In this case, we wouldn’t offer a product that requires sizable payments shortly after funding is distributed.
Who Qualifies For Construction Contractor Business Loans?
Approved businesses generally met the following criteria:
Annual Revenue
$75K+
Credit Score
550+
Time in Business
6 months+
How To Apply For Construction Contractor Business Loans:
The amount of paperwork required for the application depends on your chosen product. For most products, funds can be approved and distributed in up to three business days. Here’s how to apply:
Step 1: Choose the Right Product
The first step is choosing the most sensible solution to the problem at hand. This should require a decent amount of research, as each product is designed for different types of expenses and cash flow cycles. Are you looking to cover a short-term or long-term cost? What is the project’s billing schedule?
Considering the purpose of the funds will also help us determine the correct borrowing and terms for your needs.
Step 2: Gather Your Documents
Here are the documents and information required for all Construction Contractor Business Loans:
- 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’s needed for the SBA Loan application, visit our SBA Loan page.
Step 3: Fill Out Application
You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.
Step 4: Speak to a Representative
Once you apply, a representative will reach out to you to explain the repayment structure, rates, and terms of your available options. This way, you won’t have to worry about any surprises or hidden fees during repayment.
Step 5: Receive Approval
If and when you’re approved, funds for Business Term Loans, Business Lines of Credit, Working Capital Loans, Equipment Financing, Merchant Cash Advance, Revenue-Based Business Loans, and Accounts Receivable Factoring should then appear in your bank account anywhere from 1-3 business days. For SBA Loans, it usually takes 3-5 weeks to receive funding.
Your Business Financing Gets Set Up – Now What?
Your business loan isn’t just a way to get financing for your business. It’s also an excellent opportunity to start building (or improving) your credit.
Regardless of the type of business loan you get, make all of your required payments on time and in full. If you get a business credit line or another form of revolving credit, keep your balance below the credit limit.
Consistently making your business financing payments on time and in full will have a positive impact on your credit. And that means preferred rates and terms when you next need business financing.
What If I’m Declined For a Construction Contractor Business Loan?
Construction businesses grow by taking on increasingly complex but lucrative projects. Thanks to Construction Contractor Business Loans, you can say “yes” when your cash flow would otherwise force you to say “no.” In other words, you don’t have to let mounting expenses, long gaps between compensation, or delays in start dates prevent you from accepting critical opportunities.
Cash flow shortages can make it difficult to retain employees and build loyalty. This is one of the biggest challenges of construction businesses. Construction Contractor Business Loans ensure that you’re always able to pay your employees on time, even when projects get delayed. After all, a larger team allows you to take on larger projects.
Also, you don’t need entirely consistent cash flow, a substantial bank balance, or excellent credit to be approved. You can still get funded in a matter of days, even if the majority of your operational funding is compromised.
For this reason, many contractors take out business loans during the slow season so they can maintain funds to prepare for the busy season. In this case, we wouldn’t offer a product that requires sizable payments shortly after funding is distributed.
People Also Ask:
Why Do Construction Contractors Need Financing?
In most cases, construction contractors don’t need financing because they aren’t getting enough work. It’s because they are getting more work than their current resources and cash flow cycle will allow. Construction projects are becoming increasingly complex. They require more advanced equipment, more workers, and more time. That means more upfront expenses and more time until you receive compensation. Even if you could afford these expenses, you’d have very little funding leftover until your first billing phase. This could be weeks or even months away.
Also, when you take on more projects, you have more bills to manage. It’s challenging to stay on top of your payments when your primary concern is completing the project on time.
How Do Contractors Finance Construction Projects?
Construction contractors can finance projects with a myriad of business financing products. The product you choose depends on what you can qualify for and how much funding you need. If you’re looking for a significant amount, banks and credit unions carry the cheapest products with the most extended terms. However, these products are tough to qualify for. You’ll need excellent credit, perfect cash flow, plenty of money in the bank, and collateral. If you can’t meet these requirements, you can still access substantial borrowing amounts through companies like United Capital Source.
Banks and credit unions also prefer to lend more substantial amounts. Thus, if you’re just looking to cover payroll, supplies, or other operational costs, companies like United Capital Source will be more willing to work with you. The size of your desired amount will not make you any less likely to earn approval.
How Long Can You Finance Construction Equipment?
At United Capital Source, we have access to Equipment Financing for terms of up to five years. Terms for Equipment Financing usually reflect the equipment’s relevancy. If we offered longer terms, someone could potentially be making payments long after the equipment has become irrelevant.
Can I Get a Construction Contractor Business Loan with Bad Credit?
Yes, six of the seven products mentioned above are accessible for borrowers with bad credit. Your rates may be higher, and your terms may be shorter because bad credit makes you more likely to default. However, if you have strong cash flow or can provide collateral, your bad credit may have less of an impact on your rates and terms. We can also customize your terms and payment frequency to ensure that you can make payments while staying current on other bills.
The only option that is not accessible with bad credit is an SBA Loans. Compared to the other products, SBA Loans carry higher borrowing limits, lower rates, and longer terms. If you have bad credit, you’ll receive shorter terms to ensure you repay the loan in full.