Business Loans For Contractors

by | Apr 24, 2020 | Business Financing, Small Business Funding

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As a contractor or construction company owner, you may find slow down during the winter. Come late winter and early spring people in general begin planning for renovations, development of housing communities, rehabbing of commercial properties, deck building, etc.

Contractors start to bid on jobs which will keep you or your construction business busy throughout the Spring, Summer, and early Fall.  Once you win a bid you will get a deposit but most times it will not be sufficient enough to cover the cost for new hires and supplies.

This is when you will need to look to secure a contractor loan.


Benefits of Securing Loans for Contractors

·       Helps provide a steady cash flow. 

According to a recent survey among construction companies, 84% stated they have had issues with cash flow.  Part of the reason is most contractors or construction companies get paid once the job is completed.  In fact, 37% stated as much in the survey.

·       Purchase inventory prior to start of a job

You can use the funding to purchase the inventory for a project prior to the job and then pay off the loan once you get paid.

·       Allows you to purchase large piece of equipment needed to expand business


·       Have capital to pay bills during slower times of year


Financing Options for Contractors

There are several different loan/funding options available for contractors.  You’ll want to choose the best option based on your business needs and creditworthiness.

A few things you’ll need to keep in mind when determining which funding option is best for your business needs are:

  • How quick you will need the capital
  • The amount of working capital you need and can qualify for
  • The loan/funding repayment length
  • How flexible you want the loan/funding

Here are some contractor loan (or funding) options to consider:

Business Line of Credit

A business line of credit is ideal for a contractor looking for a flexible funding option.  Once approved you can control how much and when you withdraw your money (up to your approved amount).

Contractors who need cash immediately before starting multiple jobs at different points in time may benefit from this option.

You can get approved with less than perfect credit score, however contractors or owners with a bad credit score will not get approved for this option.


Equipment Financing

This financing type is ideal if you need to purchase a large piece of business-related equipment.  Payments for your equipment will take place monthly and include the principal and interested over a fixed term.  As securing for the financing, your purchased equipment will be used as collateral.

Similar to a line of credit, you don’t need to have perfect credit to get approved, but this is not a viable option for someone with bad credit.


Term Loan

With a Term Loan you receive a lump sum of money which you then pay back monthly plus interest.  This is similar to standard loan you would receive when purchasing a car or home.  Length of this loan is typically two to five years.

This option may not be for you if you need funding quickly as it could take up to 4 weeks to receive the funds.

You will need to have a good credit score (640 or better) in order to be eligible.


Working Capital Advance

A working capital advance is ideal for a contractor who has poor personal credit score and/or has a newer business.  Small Business Funding will put a greater emphasis on your monthly revenue and the stability of your cash flow when determining if you qualify.

However, unlike the other options which offer monthly payments and a fixed APR, the working capital advance pay back is typically daily.  It is not considered a loan, instead it’s an advance of cash on future credit card receivables.  For this reason, there is no APR rate and no set repayment terms.  There is only a set pay back amount where flat fee will be charged to you for the advance.  The pay back period tends to be shorter as well, typically 3 – 12 months.


Contractor Loans for Bad Credit

Worried that you can’t get a contractor loan due to a bad credit score.  There is an option for you, as mentioned above, you can still get funding with a working capital advance or merchant cash advance.

If your monthly revenue is at least $15,000 and you have been in business at least 6 months, then you may qualify for a working capital advance.

Once you have been qualified from a lender and show a history of making your payments on time, then securing funding after that can be easier.  And eventually as your credit score improves, you may be able to qualify for a more traditional loan with fixed APR and monthly payments.


How to Get a Loan for Contractors & Construction Companies

You will first need to determine whether you will be applying for a loan through a traditional bank or alternative lender, such as Small Business Funding.

If you are applying for a contractor loan or working capital advance with Small Business Funding.  Simply call 800-742-2995 or complete our online business funding request form.


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When applying you will need to complete the online application and provide the past 3 months of business bank account statements (this is required in order to be eligible).  If you are pre-qualified, once of our Funding Manager’s will be in touch to discuss you business needs and funding options.


What Seasonal Contractors Need to Know

Many lenders look at your business bank statements when deciding to approve you for financing.  One of the factors they look at is your cash flow.  They want to see that you have a steady flow of revenue.

If your business slows down during a specific season and you go for a loan prior to getting busy, a lender may decline you because your bank statements will show a few months of declining cash flow.

A good time to apply for funding is right at the end of your business season, when your statements are strong.  This will also help when trying to get funding later.