What keeps your construction business going? Many contractors would say clients and projects, while others claim it’s marketing and advertising. But acquiring more clients and projects and implementing marketing and advertising won’t be possible without working capital. Working capital is the lifeblood that pumps your entire operations – from generating clients to closing a deal. Construction business loans can inject working capital where you need it the most. Click here to know more about the most popular construction Business loan programs for your company.
Applying for Construction Business Loans
The speed and convenience of your construction business loan application depend on two factors: (1) the type of loan and (2) the type of lender you’re working with. Many contractors seek help from loan advisors to determine which type of loan program is best for them. Keep in mind that the required documents vary depending on the said two factors. However, expect to be asked for the following documents:
- Financial Statements
- Business Plans
- Personal and/or Business Documents
- Estimate/Costs of Your Construction Project
Traditional lenders often take a few weeks to assess your loan application, especially because lenders consider commercial construction risky. While requirements vary from lender to lender, it’s best to prepare all the documents related to your construction projects like designs, engineering specs, designs, and more.
For a more lenient and convenient application process, you might want to alternative lenders. Alternative lenders can fund your business within 24 hours and the entire online application takes no more than five minutes. The only downside is that loans from alternative lenders cost more than bank loans, but the convenience and speed of funding make up for it.
5 Tips to Qualify for Construction Business Loans
Applying for construction business loans shouldn’t be a headache. To increase your chances for approval, here are five tips you should know about.
1. Plan It Out
Taking out a loan for your construction project is a huge decision. For this reason, it’s important to thoroughly plan for it. There are multiple factors you need to consider before getting started, such as unforeseen costs, estimated costs of the entire project, and other types of expenses you need to fund. Be sure to take these factors into consideration before applying for a loan. Lenders would want to know how you plan to use the funds. For more details about loan requirements, don’t hesitate to contact SMB Compass.
2. Transparency is Important
It’s important to be transparent with your lender. Make sure all your documents are accurate, up-to-date, and readily available for perusal. Before submitting, review your application and your documents to ensure that you’re putting your best foot forward. Furthermore, lenders prefer businesses that have their finances audited by accountants or a third-party company. If you’re going to use the loan to purchase equipment, make sure to indicate the type of machines you want to buy and explain how each machine can benefit your business.
3. Check Your Credit History
Generally, lenders want to fund a growing business instead of helping business owners pay existing debt. For this reason, most lenders evaluate your personal and business credit when applying for a loan to ensure you have a good credit rating. If you don’t know your current credit score, make sure to get a free credit report from Experian or Equifax.
4. Ensure You Can Meet Minimum Qualifications
Applying for a loan you can’t qualify for in the first place is a total waste of time. Lenders have minimum qualifications for approving a business loan. However, most lenders only approve companies that surpass their minimum requirements. To avoid wasting time and money, only apply for loans you’re sure you can qualify for, and see if you exceed the requirement. If not, work on improving your credit profile or cash flow before applying.
5. Don’t Ask for More than What You Need
If you ask for more than what you need, you can expect to spend more money on interest payments. Contractors need to limit their expenses in between projects to maximize profits, so the last thing you want to do is to spend money on unnecessary costs. Additionally, asking for more can lower your chances of securing a construction business loan. As mentioned, most lenders want to know what you want to do with the money. If they think you’re asking too much, lenders might lose faith in your capacity to manage your construction projects. Check out these tips from on how to effectively manage cash flow for construction projects.