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Construction Business Loans: Capital For Construction Companies

Financing For Construction Businesses

Now that the economic recovery in full swing, the next 5 years are expected to be robust growth years in the commercial construction industry. With falling vacancy rates, balance sheets repaired and an increase in disposable income, the new few years will see an increase in demand for retail buildings. With the expected increase in demand, construction companies are expected to stay busy for quite a while. A busy construction company tends to need financing for equipment and materials, along with an increase in payroll.

Bank Loans For Construction Companies

Traditional banks offer small business loans that have the best rates and terms of all business lenders (mainly due to the fact they are unwilling to take much risk). So in order to get a traditional bank small business loan, you will have to show fantastic credit along with consistent revenues in the trailing years.

  • Bank Loan Rates: 5-10%
  • Bank Loan terms: 1-30 years

SBA Loans For Construction Companies

SBA loans are actually provided by traditional lenders, but the government backstops up to 85% of the loan in case of default by the borrower. Since this reduces the risk exposure of the lender, they are more willing to provide a business loan to a construction company that may have a less than stellar financial track record.

  • SBA Loan Rates: 6-8%
  • SBA Loan Terms: 1-10 years

Asset Based Loans For Construction Companies

Asset based financing allows a company to leverage its existing business assets to attain the working capital they need. Generally, an asset based business lender will generally provide funds through a line of credit, in which the lender will set a maximum amount of credit against a percentage of the construction company’s accounts receivable.

  • Asset Based Financing Rates: 7-20%
  • Asset Based Financing Terms: 1-2 years

Alternative Loans For Construction Companies

Mid prime alternative construction loans are the perfect financing facility for borrowers with decent credit, but are still unable to get business financing through the more traditional small business lenders. While a mid prime alternative loan doesn’t rates as good as traditional banks, they have better rates than other of small business loans offered by most alternative financing lenders.

  • Mid Prime Financing Rates: 9-20%
  • Mid Prime Financing Terms: 1-5 years

Equipment Leasing For Construction Companies

Generally an equipment leasing company will purchase the equipment, and then lease it to the construction company over the course of months or years. At the end of the term, the small business is usually provided an option to purchase the equipment. Construction equipment leasing is a good option for construction companies who don’t have the finances to pay for the full purchase price of equipment, or don’t want to commit long-term to a piece of equipment that they may not need or want in the future.

  • Construction Equipment Leasing Rates: 5-15%
  • Construction Equipment Leasing Terms: 1-2 years

Merchant Cash Advances for Construction Companies

If a construction business finds itself needing fast funding for working capital, payroll or other reason, a merchant cash advance is probably a good choice (if not the only choice). Merchant Cash advance financing is the fastest funding type of financing available. A MCA is not a loan, but instead the sale of future bank deposits in return for upfront cash.

  • Construction Merchant Cash Advance Rates: 16-100%
  • Construction Merchant Cash Advance Terms: 6 months – 2 years

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