Construction financing is always tricky. Banks and financial institutions usually defer to deal with large companies, so it’s even more difficult than what is typical to get financed. Yet smaller companies still need construction financing for salaries, office equipment, rent, office costs and other expenses. So let’s look at three different ways to get construction financing.
The Small Business Administration (SBA). It’s important to remember that the SBA is not in the business of giving loans, but guaranteeing them for banks to make the loan process easier. They are a decent, but tedious option for smaller businesses. In addition, the SBA can also provide “microloans” that make are easy for loans under $50,000. They can usually be disbursed fairly quickly. For larger loans, this is much more difficult, and can require a lot more time and paperwork. They don’t work well for construction financing if you need the capital quickly.
Construction Factoring Financing. Construction factoring is one of the smartest ways for subcontractors with cash flow problems to meet their needs. Because most invoices are paid net 30 to net 60 days, often subcontractors can find themselves in a crunch when it comes to making cash flow work. With the help of a construction factoring company, not only is the problem of collection of receivables taken care of for a fee, but subcontractors get their money very quickly to take care of needed expenses.
Your Own Resources, Friends and Family. This method has its advantages, as well as its own pitfalls. While you will have to worry less about repayment terms when working with your own resources, this can lead to serious debt issues. One solution is to enlist the help of friends and family. But it also runs the risk of alienating friends and family when you might need them later.
If you’re looking for financing, give us a call. We are experts in the construction factoring industry and can help get you the cash flow you need to get everything working smoothly again.