Construction Finance for Builders
An increase in construction and house renovations not only in the United States but also all over the world has led to an increase in the number of construction companies. However, demand in this industry is seasonal. Therefore, building businesses experience significant dips in working capital.
Construction businesses may incur expenses on labor and supplies for a project before they get paid in full even during busy seasons.
Construction finance for builders is one of the many challenges construction companies face. Access to funds is usually a deciding factor between companies that thrive in the construction sector and those firms that fail.
Construction firms should have a ready source of funding to help them keep their bills paid and give them the advantage of taking up opportunities when they arise.
How to use construction business funding
Business construction funding can be used to help business owners to take up a new opportunity and take care of day-to-day expenses such as:
Buying or replacing damaged supplies
Training new workers
Managing cash flow
Expanding and upgrading the firm’s facilities
Creating new marketing materials
The benefits of getting construction business funding
You require working capital to enable you to take on more construction work. Here are the advantages of getting financing for construction companies:
Make payroll consistently. Your employees are not likely to leave your company for other jobs since they know they will be paid on time.
Keep material costs low to maximize profits. When you have cash on hand, you have the purchase and bargaining power. You can negotiate with vendors to enjoy discounts and special pricing for fast payment.
Enjoy getting land and public-sector jobs. Most public sector projects include minority-owned, incentives and mandates to hire local women-owned subcontractors. Construction companies that are in those groups are assured of landing more jobs if they have enough working capital.
Negotiate better pricing from subcontractors. Contractors are likely to offer you the best rates if they know you will pay them. Therefore, you stand in a better position if you have access to working capital than construction companies with limited finances.
Small business administration (SBA) backed funding
The small business administration does not normally lend money to construction companies. Instead, they give partial assurance to approved creditors. SBA-backed lending offer reasonable interest rates as well as business-friendly repayment terms. Your business will be required to provide personal collateral, as it is the norm for all secured bank loans. Unfortunately, approval rates of SBA-backed lending are low as a result of relatively strict underwriting requirements.
Business credit card
A business card is a personal credit card that contains the business name on it. It is a useful source of short-term financing for the company’s supplies and materials. However, the financing cost of this option can be high, and the usage is usually restricted by the owner’s credit limit.