The timber, lumber and wood industry has been on the upswing ever since the 2008 recession. Rising demand—coupled with a tariffs on Canadian lumber that began in 2017 and tree diseases affecting many lumber yards in Canada—has led to a decline in supply and opportunities for U.S. lumber companies. While many lack the capital on hand to be able to ramp up production via hiring, purchasing new equipment or considering a merger or acquisition to increase inventory, a ready solution is available in the form of business loans for timber, lumber and wood companies.
Key Questions to Ask
Before forging forward to determine what type of business loan is right for you, it’s best to answer the following key questions:
- Are you an existing owner or seeking to open or acquire a new business? It will be easier for someone who already has a business—and thus a track record—to secure funds, especially from a traditional lender.
- What can you afford to borrow? Be sure to take a hard look at your budget before you decide to try to secure a loan.
- What is the funding timeline? Make sure to structure your loan so you’re not still paying on it after you’re no longer receiving the benefits of what it funded.
- What is your business and credit history? If you have a credit score above 750, at least two to five years in business and strong financials, you may be able to secure a bank loan but otherwise your best bet is checking out alternative lenders, which specialize in working with borrowers banks won’t consider.
Why Before What
The next important question you need to answer is why you’re seeking a business loan for your timber, lumber and wood company—since the type of loan you need will depend on what you’ll be using the funds for. Common reasons are:
- Purchasing new timberlands
- Expanding in or starting a new seedling nursery, chip mill or sawmill
- Purchasing equipment such as forklifts, saws, pallet jacks and storage racks
- Covering expenses during slow times
With the “why” in mind, it’s time to determine the “what,” as in what type of business loan makes the most sense for your specific needs.
Types of Business Loans
Timber, lumber and wood companies’ funding needs frequently lead them to one of the following three types of business loans:
- Equipment loans—These loans are focused on helping you purchase new equipment to either expand your operations or replace aging equipment with newer models.
- Lines of credit—Similar to using a credit card, you’ll be assigned a credit limit and can draw from that as needed, time and time again as long as you don’t go over your limit and keep current on your payments.
- Working capital loans—These loans, which will help pay for operational expenses like utility bills, payroll and gas for delivery trucks, can be particularly helpful during a dip in business.
The Bottom Line
There are plenty of opportunities in the timber, lumber and wood industry for companies to succeed as long as they have the ability to take on new work while continuing to serve their existing customers. There’s no reason to sit on the sidelines if your company needs capital to hire, purchase new equipment or enhance its marketing efforts due to the existence of business loans for timber, lumber and wood companies.
Clear Skies Capital has helped many timber, lumber and wood companies determine the business loan that’s best for them and get the financing they need in a timely fashion. Contact us today at 800-230-9822 to discuss your company’s needs.