As a contractor or construction company owner, you may find decelerate throughout the winter. Come late winter and springtime a lot of people begin planning renovations, development of housing communities, rehabbing of business properties, deck building, etc.
Contractors begin to bid on jobs which will keep you or your construction business busy through the Spring, Summer, and early Fall. Once won by you an offer you're going to get a deposit but many times it won't be sufficient enough to cover the price for new hires and supplies.
This happens when you will need to look to secure a contractor loan.
Benefits of Securing Loans for Contractors
@ Helps give a steady income.
According to some recent survey among construction companies, 84% stated they have had issues with cash flow. Part from the reason is most contractors or construction companies get paid once the job is finished. In fact, 37% stated just as much within the survey.
@ Purchase inventory just before start of a job
You can use the funding to purchase the inventory for any project before the job and then pay off the loan when you are paid.
@ Allows you to purchase large device required to expand business
@ Have capital to pay bills during slower times during the year
Financing Choices for Contractors
There are some different loan/funding options available for contractors. You'll want to choose the best option based on your company needs and creditworthiness.
A few things you'll need to keep in mind when determining which funding choice is best for your company needs are:
- How quick you will need the capital
- The amount of capital you'll need and may qualify for
- The loan/funding repayment length
- How flexible you want the loan/funding
Here are a few contractor loan (or funding) options to consider:
Business Line of Credit
A business line of credit is ideal for a contractor searching for a flexible funding option. Once approved you are able to control just how much and when you withdraw your hard earned money (as much as your approved amount).
Contractors who need cash immediately before beginning multiple jobs at different deadlines will benefit from this option.
You can get approved with sub-standard credit score, however contractors or owners with a bad credit score won't get approval for this option.
Equipment Financing
This financing type is perfect if you need to purchase a large bit of business-related equipment. Payments for the equipment will take place monthly and can include the main and interested on the fixed term. As securing for the financing, your purchased equipment is going to be used as collateral.
Similar to some line of credit, you don't need to have perfect credit to get approved, but this isn't a viable option for somebody with bad credit.
Term Loan
With a Term Loan you have a lump sum of money which you then pay back monthly plus interest. This is comparable to standard loan you'd receive when purchasing an automobile or home. Length of the loan is usually two to five years.
This option might not be for you personally if you need funding quickly as it could take up to 4 weeks to receive the funds.
You will need to have a good credit score (640 or better) in order to be eligible.
Working Capital Advance
A capital advance is ideal for a contractor that has poor personal credit rating and/or has a newer business. Small Business Funding will put a greater emphasis on your monthly revenue and the stability of the income when determining should you qualify.
However, unlike another options that offer monthly payments and a fixed APR, the working capital advance pay back is typically daily. It isn't considered a loan, instead it's an advance of money on future charge card receivables. For this reason, there is no APR rate and no set repayment terms. There is only a set repay amount where flat fee will be charged for you for that advance. The pay back period is commonly shorter too, typically 3 – Twelve months.
Contractor Loans for Bad Credit
Worried that you can't get a contractor loan as a result of poor credit score. There is an option for you, as mentioned above, you can still get funding with a working capital advance or merchant cash advance.
If your monthly revenue reaches least $15,000 and you have been around at least Six months, you might be eligible for a a working capital advance.
Once you have been qualified from a lender and show past making your instalments promptly, then securing funding next can be easier. And eventually as your credit rating improves, you may be in a position to qualify for a more traditional loan with fixed APR and monthly payments.
How to Get a Loan for Contractors & Construction Companies
You will first need to see whether you'll be trying to get a loan via a traditional bank or alternative lender, such as Small company Funding.
If you're applying for a contractor loan or working capital advance with Small company Funding. Simply call 800-742-2995 or complete our online business funding request form.
When applying you will have to complete the online application and supply yesteryear 3 months of business bank account statements (this is needed in to meet the requirements). If you're pre-qualified, once in our Funding Manager's come in touch to discuss you business needs and funding options.
What Seasonal Contractors Have to Know
Many lenders look at your business bank statements when choosing to approve you for financing. One of the factors they appear at is your income. They want to see that you have a steady flow of revenue.
If your company decelerates throughout a specific season and you go for a loan prior to getting busy, a lender may decline you since your bank statements can have a few months of declining income.
A great time to try to get funding is appropriate at the end of your business season, whenever your statements are strong. This will even help when trying to obtain funding later.