Construction firms require additional financing at some point. They can use the extra cash to make their payrolls, purchase construction equipment, pay rent and take care of other unexpected expenses. Unfortunately, financial institutions enforce lengthy loan application procedures and much documentation that turn off many construction firms. Nevertheless, there are many alternative sources of funds that offer customized loans for construction companies. Here is a list of the primary sources of finance for construction firms. Their rates, terms of payments and qualifications vary, and it is, therefore, advisable to compare the different lenders before making your application.

Construction Factoring

Factoring is becoming a popular lending option for construction firms. Here, the company sells its customer invoices to the lender, who is commonly known as the factor. When the firms make the application, the factor reviews the value of the invoices and then provides a considerable loan offer that matches the amount of the invoice. Factoring is a short term financing method, and the invoices should, therefore, have a short repayment period of up to 60 days. It is easy to qualify for invoice factoring, provided that your clients have an excellent credit rating.

SBA Loans

SBA is a financing program for small businesses. The loans are usually backed up by the USA government; hence, they have a partial guarantee to the lending firms. SBA loans have lower interest rates as compared to many lenders. This is because their primary aim is to help the small business to thrive well and compete with the already established firms. The small construction firms can take advantage of the SBA loans and benefit from the favorable loan repayment terms and the friendly interest rates. The loan limits are quite high, but you must provide collateral.

Equipment Financing

Equipment financing helps business to acquire modern tools for their construction activities. The construction firms create a business plan explaining how they intend to use the new equipment. The lender carefully reviews the proposal and determines the current market value of the equipment. If the firm qualifies, the lender purchases the equipment and then uses it as the collateral. Other than purchasing, a construction firm may use equipment financing to lease the devices they need, for a specified period. Leasing is quite affordable, considering that most of the equipment has a one-time usage.

There are many financing options for construction firms, but the above are the main ones. A firm can consider SBA lending, or consider factoring if it has short term customer invoices. Equipment financing is also an ideal solution for equipment needs.