A Guide to Refinancing Your Construction Business

A Guide to Refinancing Your Construction Business

Subcontractors in the construction industry often have difficulty obtaining needed financing. Traditional banks tend to work primarily with larger businesses. This limits the options for subcontractors when they need to cover their rent, equipment, employee salaries, transportation, and vendors. However, there are alternatives available. Here are some possible methods of funding your construction business.

Fund It Yourself

Many construction business owners finance their businesses by dipping into their savings or retirement funds, utilizing credit cards, or taking out home mortgages. Alternatively, they approach family and friends for loans or equity buy-ins. Doing business with family and friends, though, can risk the stability of your relationships.

Approach the SBA

The U.S. Small Business Administration has programs that can assist subcontractors in the construction business. In particular, the SBA Microloan program disburses small amounts of funding fairly quickly. However, if you need a larger amount of financing, specifically through the 7(a) Loan Program, you have to go through a difficult and lengthy application process.

Incentivize Clients to Pay Faster

Often cash flow problems occur because you have to wait for 30 to 60 days after jobs have been completed to get paid by your clients. You can speed up this process by offering your customers discounts for early payment.

Obtain Financing from Suppliers

Subcontractors often face the dilemma of having to pay suppliers before their clients have paid them. To avoid this, ask your suppliers for 30 to 60-day payment terms, or arrange for supplier financing via a finance company.

Apply for a Merchant Cash Advance

A merchant cash advance allows you to get an amount of funding in exchange for a percentage of future sales. These are relatively easy to obtain and quick to receive. However, they are costly and should only be used if you are confident you can pay them back expediently.

Factor Your Invoices

Construction factoring involves receiving an advance from a financing company based on your unpaid accounts receivable. This form of funding is also quick and fairly easy to obtain, and it provides an immediate boost to your company’s cash flow.

For more advice on financing your construction business, contact Champagne Global Capital Lending.