The Dodge Construction Network mid-year outlook projects an increase of 2% in total construction starts this year and another 6% in 2024 despite the fact that the industry will continue to suffer from a skilled labor shortage. The healthcare and education sectors will lead the way, with the office and warehouse sectors not faring as well.
The umbrella of “construction” includes a wide variety of specialties, including:
- New building construction
- General contractors
- Remodelers and renovators
At one time of another, any of these construction businesses may need access to capital to bid for a new project, fill seasonal gaps, maintain cash flow during long billing cycles or purchase raw materials to start a project. Funds may also be needed to start a new business or expand the reach of an existing one.
Common Construction Loan Options
The six most popular construction business loan options are:
- SBA loans—which have a lengthy and extensive application process, and most applicants are rejected
- Bank loans—which can take weeks or months to process, and since banks consider the construction industry as high risk getting approval can be tough
- Merchant cash advances—which aren’t really loans but asset purchases that are repaid as debit and credit sales come in, so they’re best for consumer-facing construction businesses
- Invoice financing and factoring—also not technically a loan but a type of accounts receivable financing through which the business sells outstanding invoices at a discounted price in exchange for cash (typically 70–90% of the invoice’s value)
- Business lines of credit—similar to credit cards but with longer terms and lower rates, businesses may draw funds up to an approved maximum amount as they’re needed
- Equipment financing—as you might expect, financing to enable the purchase of expensive equipment, with the equipment serving as collateral
Requirements For Business Loans
The requirements construction businesses will face when applying for business loans are going to vary depending on which vehicle they desire. At the very least, there will usually be a credit score requirement, along with a preferred time in business and certain level of average revenue. The good news is that with so many options, there’s likely to be one that will work for every construction business.
How To Apply
Every lender will have its own process for soliciting loan applications. Many simply require filling out an online form to get started. As noted above, the road to securing an SBA or bank loan is going to require more time and detailed information while many alternative lenders are able to approve applications and release funds within one or two business days.
Clear Skies Capital has helped many construction businesses determine the loan option that’s best for them. Contact us today at 800-230-9822 to discuss your specific needs.