Business Loans for Contractors
Home contractors juggle many important tasks. Not only does this include various aspects of hands on project work, but they also deal with behind-the-scene tasks that keep the business growing. This includes everything from keeping up with payroll to having the right equipment and supplies on hand for each and every project. It’s not surprising that creative small business funding is sometimes needed.
You may need to find funding quickly and with the right terms. In this line of work, time is of the essence and you don’t have 30 to 90 days to wait for the capital required to move forward with your business.
Fact is, it usually takes money to make money. Funding can help you meet current expenses and take on larger projects that can increase your bottom line. Success is found in what you can do today that leads to a more profitable tomorrow.
Funding may be needed for:
- To pay the upfront costs to your material suppliers. You may have a deposit from your client, but you won’t see the balance until later down the road. Suppliers need to be paid and you need working capital today to do so.
- Those unexpected other upfront material costs. There can suddenly be a few things missing from the required materials and supplies you have ordered for your job site. You must be able to purchase them quickly for work to continue on schedule.
- Paying your sub-contractors is vital to keep your business running smoothly. It is hard to retain good qualified sub-contractors for your project if they are left waiting for a paycheck.
- Daily operation expenses add up. From fuel for your trucks and equipment to office expenses, you need to keep your business running smoothly each day.
Whether you are starting out, looking to grow or need extra funding to complete a project on time, for many contractors, bank financing is either denied or takes way too long to be of any assistance in seizing a business opportunity. According to contractors.net, more than 50 percent of all home improvements of $5,000 or more are financed each year. The bottom line is you need a contractor financing solution that can provide funding quickly and effectively.
The Top Business Loans for Contractors
There are a few choices in loan products and lenders for home contractors. Each comes with specific criteria, benefits and drawbacks.
Small Business Association (SBA) Microloan for Contractors
The SBA offers a few loan options including the Microloan. This program loans you up to $50,000 to help small businesses start up and expand. A government agency, the SBA provides funds to specially designated intermediary lenders, which are nonprofit community-based organizations with experience in lending as well as management and technical assistance. These intermediaries administer the Microloan program for eligible borrowers.
Microloans can be used for:
- Working capital
- Inventory or supplies
- Machinery or equipment
- The average microloan is about $13,000.
- Your credit rating is important in loan approval.
- An SBA microloan cannot be used to pay existing debts or to purchase real estate.
- If you apply for SBA microloan financing, you may be required to fulfill training or planning requirements before your loan application is considered. The training is designed to assist in skill-building to expand your business.
- It takes a long time to go through the application process. Approval can take as much as 90 days.
Alternative Financing Options for Contractors
There are lenders out there that offer you an alternative solution to get the funding you need quickly and easily. They think outside the box of typical loan solutions and have created custom-designed products to fit a home contractor’s business needs. Alternative lenders offer several funding options including small business loans and lines of credit, often with more flexibility and ease than banks, credit unions or the SBA.
Alternative lenders offer a quick, easy application process to secure your loan. They tend to look more at your business potential, what you need the funding for, and the overall health of your business. They focus less on your credit history, which is an important consideration if your credit score is less than stellar.
Funding provided by alternative lenders will take less time. There are various funding solutions available, and all can provide cash in hand very quickly.
- Interest rates may be slightly higher than a bank, but you stand a greater chance of approval.
For contractors, managing cash flow and covering unexpected expenses is a constant challenge. As projects vary in size, scope, and timeline, contractors need access to funds to address the ever-changing demands of their business. One flexible financing solution that can help meet these needs is a line of credit for contractors.
Lines of Credit for Contractors
A line of credit is a revolving loan that allows contractors to borrow funds up to a pre-approved limit, as and when required. Unlike traditional loans, where the borrower receives a lump sum amount and starts repaying it immediately, a line of credit allows contractors to draw funds as needed and only pay interest on the amount utilized.
While lines of credit can be a valuable financing solution for contractors, it is essential to use them responsibly. Contractors should be cautious not to overextend themselves and maintain a disciplined approach to borrowing and repaying funds.
To secure a line of credit, contractors need to approach a suitable lender, such as alternative financing provider. Lenders will assess the contractor’s credit history, financial stability, and business performance before approving the credit line. By understanding the benefits and responsible use of lines of credit, contractors can leverage this financing tool to meet their unique needs and support their business’s growth and success.
Bank Loan for Contractors
According to smallbusiness.chron.com, bank loans can be used to provide cash to home contractors, but only if they can offer up some type of valuable collateral for the loan, show documentation of a steady and reliable history of revenue produced by the contracting business, and possess a great credit score.
- Your funding, if you are approved, may take 30-60 days to receive the cash you need.
- Bank lenders often require personal guarantees from the small business owners.
- If your business is new, or a start-up, you face extreme obstacles. Because they require three years of business financial data, banks regularly turn away requests for start-up loans.
The funding needs of home contractors can change from one month to another. Many situations can result in a need for extra money. When seeking a fast, efficient way to fund your business needs, it is important to know and understand each product available to you. For all your working capital needs, contact Credibly!