Businesses of different scales benefit from having the right financing options at the right time. When dealing with a sudden spike in customer orders, being able to use a loan to finance production and delivery means an online business can expand its scale. When aiming for long-term growth, there are secured financing options to turn to as well.
For construction firms, knowing there are available financing options and understanding how to best utilize them are the kind of things that bring huge competitive advantages on the market. Before you start using loans to help your construction firm, we are going to take a look at the financing options available today.
SBA 7(a) Loans
The SBA 7(a) loans are government-backed loans designed specifically to stimulate the construction industry. Construction companies – including yours – can use this financing option for various purposes, including for consolidating existing debts and for financing new projects.
SBA 7(a) loans are tough to qualify. You have to make sure that you have your papers in order, and that you are operating by the book. Making one of the most common Chicago building violations is simply not acceptable.
Business Credit Cards
For smaller expenses and everyday needs of the business, business credit cards can be incredibly useful. When used correctly, business credit cards can help you maintain a healthy cash flow while keeping your construction firm running smoothly.
Naturally, you cannot use credit cards to make bigger purchases. Even when the credit limit allows you to put bigger expenses on your business credit card, the cost of using this unsecured loan will be too big for the business to absorb.
Business Line of Credit
Rather than using business credit cards, you can turn to a business line of credit for those larger purchases. Business lines of credit are a fantastic financing option for construction firms in their rapid-growth stage. Having a line of credit means you always have the money to cover productive expenses.
I said productive expenses because those are the kind of expenses you want to cover. You want to keep the use of a line of credit for productive reasons so you can pay the interest with ease and repay the loan’s principal amount in full once the project is completed.
The last financing option we are going to look into is equipment financing. As the name suggests, equipment financing is designed to help construction companies invest in machinery and big equipment, thus expanding the business’s operational capacity.
The equipment financing will deal with the total cost of ownership. In return, the purchased equipment is placed as collateral for the loan, with you retaining usage rights for as long as you repay the loan. Another interesting point to note about equipment financing is that new construction companies can also qualify for this financing option.
Regardless of the financing you want to use, always make sure you are going for the best option according to the situation you face. Check the cost of using the loan and only use financing for productive purposes. That’s how you leverage loans and grow your business at a faster rate.