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How Construction Business Loans Can Help You

A construction loan is a type of loan used to finance the costs associated with the construction or renovation of a building. Although running a construction or contracting business comes with many challenges, it’s important to know you’ll have the capital you need to overcome high turnover rates, project delays, additional material, seasonal costs, and other demands unique to the industry.

Qualifications for a Construction Loan

1. Good credit score: Most lenders require a minimum credit score of 680 or higher for construction loans.

2. Proof of income: Lenders will want to see proof of your income and employment history to ensure you can make the payments on the loan.

3. Down payment: Most lenders require a down payment of at least 20% for construction loans.

4. Documentation of the project: Lenders will want to see detailed plans, cost estimates, and other documentation related to the project in order to approve the loan.

5. Experienced contractor: Lenders may require that you use an experienced contractor who can provide references and proof of insurance.

6. Collateral: Some lenders may require collateral such as real estate or other assets in order to secure the loan.

Best Working Capital Loan for Contractors

SBA 7(a) Loan

SBA 7(a) Loans

The most attractive of all small business loans, SBA 7(a) loans, provide long repayment periods and low interest rates. Small banks, which are the primary lenders of these loans, are guaranteed up to 85% of the loan by the U.S. Small Business Administration in case of borrower default. This security allows for competitive rates for borrowers.

Best SBA Loan Alternative for Contractors

Term Loan

Term Loan

Term loans are comparable to SBA 7(a) loans, in that they provide a lump sum of capital and a specific repayment period. However, lenders don't require as stringent a credit history for qualification. This may mean higher interest rates, but if you need a lump-sum "traditional" business loan quickly, a term loan may be an ideal option.

Best Contractor Loan for Supplemental Purchases

Business Line of Credit

Business Line of Credit

A business line of credit is a great tool for contractors, as it provides the ability to draw from a sum that has been pre-approved by a lender. This type of loan is like a combination of a traditional loan and a cash advance on a credit card. It is "revolving," meaning that once you pay it back, you can draw against it again.

Best Contractor Loan for Everyday Expenses

Business Credit Card

Business Credit Card

With a 0% intro APR business credit card, you can make purchases without having to pay interest for an introductory period. This is like taking out a loan without the extra cost of interest. Furthermore, if you pay off your balance in full and on time, you will be building your company's credit history which can lead to more options in the future.

Best Loan for Contractors to Finance Gear

Equipment Financing

Equipment Financing

If you're in the market for equipment, from heavy machinery to computers, then this type of loan allows you to purchase large items without having to put up collateral. After being approved for a loan, you'll receive a quote for the gear and a lender will finance a large portion of the cost.

Best Contractor Loan for Cash Flow

Invoice Financing

Invoice Financing

Many contractors face cash flow issues due to unpaid invoices. Invoice financing can be a great solution to this problem, as it allows you to receive a large portion of the invoice (usually 85%) upfront from a lender. This money can then be used to pay staff, purchase supplies, and keep your business running as usual.

Ready to Apply?

Filthy Rich Idea makes it easy to get a business loan for your construction company. Apply online and we will give you a decision within minutes. One of our Loan Specialists will tailor a loan package for your business needs. As soon as we receive the application and documents, your dedicated Funding Advisor will be in touch to discuss the application and next steps. Approval typically takes 24-48 hours, and funds can be deposited into your account the following business day. It’s that simple!

Business Funding - Knowledge Is Wealth

Pros and Cons of Construction Loans

Pros and Cons of Construction Loans

Construction loans typically offer flexible repayment options, allowing you to pay off the loan in full or in installments as…

The Costs and Terms in Construction Equipment Financing

The Costs and Terms in Construction Equipment Financing

Construction equipment financing is a popular option for many construction firms who need to replace outdated machinery or build their…

FAQs

What information and documents do I need to apply for funding?

Our lending partners will need 3 months of bank statements, the government IDs of all applicants, 1 or 2 years of business tax documents, business P&L and balance sheets, business licenses and formation documents, and a business EIN.

What is APR?

APR stands for Annual Percentage Rate and is a measure of the cost of borrowing money. It is the interest rate expressed as a yearly rate, including fees and costs associated with the loan. It's a good way to gauge the overall cost of your loan and your planned repayment schedule.

How long does it take to get the money once my business is approved?

Once approved, transfer times vary depending on the lender, but it is possible to receive your capital in as little as 72 hours after approval. Lines of credit, on the other hand, may be used immediately upon receiving approval in some cases.

How do I pay back the funding amount?

Our lenders offer secure digital payment portals so that you can make your repayments on time and without penalty. You may be able to change due dates and other important information.

How To Best Prepare for a Business Loan

Determine the amount of money you will request—and do not request an excessive amount.

Although you may have the option of a small business loan, it is important to only request the amount of money that you need and can afford to pay back. This will demonstrate to your lender that you are financially responsible and increase your chances of approval.

Understand the limitations and costs of your loan.

Before committing to a loan, be sure to consider the speed, flexibility, and cost. Some loans are more or less flexible while others charge for speed. Understand the APR and other associated fees and costs so you can make an informed decision.

Avoid taking out multiple loans.

If you already have a loan, it is not advisable to take out another one. This is calledstacking loans and is generally not allowed, except in certain cases (e.g. having a business line of credit with a term loan). If you stack loans without the permission of your original lender, you could be in breach of your loan agreement and default on your first loan. Before taking on another loan, check with your lender to make sure it is allowed.

Ready to Apply?