Construction companies often experience challenges when it comes to financing their projects. Fortunately, there are now powerful tools available in the form of SBA loans. In this blog post, we explain the basics of SBA loans and why they are an excellent solution for construction companies.
Construction Companies and Business Loans
While every construction company has unique needs determined by its size, goals, and the market niche it serves, there are some common reasons why organizations in the construction industry resort to business loans.
Equipment Purchases
One of the most common reasons why construction companies need to take out loans is to purchase equipment. Heavy machinery such as excavators, bulldozers, and cranes can cost a fortune. As a result, many contractors require funding to cover the cost of acquiring these expensive pieces of equipment that are necessary to complete their projects.
A loan can help companies purchase the equipment they need without depleting their cash reserves.
Project Financing
Construction companies may also require project financing to cover the cost of building projects. It can be challenging for companies to come up with the funds needed to cover all the costs of a construction project upfront.
Banks and other lenders can offer financing options that cover the cost of the project, including labor and materials. This is a common option, especially for startups that do not yet have sufficient cash flow.
Cash Flow Management
Cash flow management is another critical factor in the construction industry. Sometimes, companies can have a lot of outstanding invoices and payment delays. They may require a short-term loan to cover immediate expenses while waiting for payments to come in.
This type of loan can help construction companies maintain cash flow, keeping the business operating without interruption.
Expansion and Growth
When a construction company has proven successful, it can be tempting to expand its operations. Expansion comes with significant costs, such as opening another location, hiring more employees, and purchasing additional equipment. To make this growth possible, construction companies often take out loans.
The funds from the loan will permit the company to make these critical investments required to create more significant income streams and long-term profitability.
Why SBA Loans Make Sense
Now that we have a clear picture of the financing needs of construction companies, we are better equipped to understand why SBA loans are so well suited for this type of organization.
- Learn more: SBA 7(a) Loans
- Learn more: SBA 504 Loans
Potentially Low-Interest Rates
One of the most significant benefits that SBA loans have to offer is the potential for low-interest rates. For a construction company, this can mean significant savings, especially when compared to high-interest rates on traditional bank loans. In addition, SBA loans have extended repayment terms, which can help construction companies to better address cash flow deficits.
Easy to Qualify For
With SBA loans, it is easier to qualify for the right amount of funding that construction companies need. They require less stringent credit criteria since the SBA offers a government guarantee rather than the bank assuming all the risk. Thus, start-ups or those with less than stellar credit histories can also be approved for SBA loans.
Better Access to Expert Advice:
Lastly, construction companies gain access to professional advice and mentorship when they seek to take out an SBA loan. In addition to financing, the SBA provides valuable guidance on how to avoid pitfalls, understating loan terms, and the ability to access other helpful resources.
Wrapping It Up
SBA loans are an excellent solution for construction companies seeking to finance their projects. They providelow-interest rates, easy qualifications, and expert advice. With the challenging economy and the many factors impacting construction businesses, an SBA loan may be the best way to maintain a healthy cash flow, keep your company growing, and position it to succeed.
Gellyfish: Certainty of Execution in Commercial Loans
At Gellyfish Commercial, we offer commercial financing solutions with the certainty of execution you need to take your business to the next level.
We are located in Riverside, and work with clients all over California and beyond. Contact us today by email (info@gellyfishcommercial.com), telephone (877-800-4493), social media (Facebook, Twitter, LinkedIn), or through the live chat on our home page to schedule a free consultation.
