What Contractors Need to Know About Specialty Construction Loans?

Most researchers are optimistic that the construction industry will continue to flourish through the end of this year and beyond — although labor shortages may limit the number of new jobs being added.

For 2017: FMI Corporation — which provides management consulting to the construction industry — believes the combination of favorable general economic conditions, a high level of consumer confidence, and the potential for tax reform and increased federal spending promises to keep the industry on track for another positive year.

For the long term: PwC — which focuses on building trust in society and solving important problems — forecasts the volume of construction output will grow by 85% to $15.5 trillion worldwide by 2030, with three countries — the U.S., China, and India — leading the way and accounting for 57% of all global growth.

What does this mean for specialty contractors — which include those focused on concrete; electrical; excavation; painting and paper hanging; plastering, drywall, and insulation; plumbing, heating, and air conditioning; roofing, siding, and sheet metal work; and other specialty trades? According to FMI, they should be planning for contingencies and executing based on the facts.

Investing in the Future

Specialty contractors that will flourish over the long term must educate themselves in a variety of areas to ensure they can keep pace with the construction industry as it evolves. They need to be aware of:

  • The demand for the current industry as a whole
  • Labor fluctuations and how they affect payroll — as well as their ability to pay on time
  • The demand for green buildings and contractors getting LEED and other specialty certifications
  • The adoption of new technologies, such as drones and 3-D printing

In addition, specialty contractors must be cognizant of the trickle-down effect of receivable delays. When developers fail to pay general contractors on time, general contractors won’t be able to pay specialty contractors on time — which can leave them in a bind because they still need to meet payroll and purchase the materials required to do the work. This is where companies like Clear Skies Capital (CSC) come into play.

Construction Equipment Financing

Working Capital or Equipment Financing

Specialty contractors that need to overcome short-term cash flow issues have solutions available to them. Whether a situation like the one above is occurring — when payments are delayed but the bills still need to be paid — or an opportunity exists to staff up for new and larger projects if payroll can be met, a working capital loan is the perfect “stopgap.”

Turning to alternative financing sources like CSC for working capital loans offers significant benefits to specialty contractors — such as no collateral requirements, less paperwork, and the availability of access to cash for early-stage businesses. Perhaps most importantly, they can receive the money quicker than they would be working with a bank; CSC normally does same-day funding, with 72 hours being the worst-case scenario.

Along the same lines, equipment loans can allow specialty contractors to purchase new/used equipment for new projects rather than having to rent (which can become very costly and eats into your ROI). Equipment loans can also allow specialty contractors to avoid having to turn down the project due to lack of equipment and resources needed to fulfill the agreed-upon project timeline. The benefits are very similar to those noted for working capital loans, but the equipment being financed serves as collateral that generates longer financing terms so as to keep monthly costs down and the funding time is normally three days.

The Takeaway

Specialty contractors need to make sure they can continue business as usual if project payments are delayed — and they also want to ensure they’re positioned to be able to accept new work that might strain their resources. The solution to both those situations can be working capital or equipment loans from CSC.