Construction companies require a lot of working capital to take on projects. Many times, the first payment draw isn’t until a month into the project, when tens of thousands of dollars in equipment, materials, and labor have already been spent. Even though the construction industry is clearly on the rebound, it’s still hard for many to qualify for traditional bank loans.
If you are having trouble securing a loan for your project, there are some alternative methods of acquiring working capital, as Evan Singer wrote in his piece on ENR, titled Contractors Should Be Aware of Alternative Funding Sources for Project.
Give Your Credit Score a Boost
The best way to obtain a loan of any kind is to maintain your credit score. Believe it or not, the personal credit score of the owner of a business can affect the business’ ability to obtain a loan. Other than paying off debt and making on time payments, another way to give your credit a boost is to create a Data Universal Numbering System (DUNS) number through Dun & Bradstreet. As Marco Carbajo explains on his post on the Small Business Association’s blog, a DUNS number is the most common way to identify a company and both suppliers and creditors pull credit reports through Dun & Bradstreet. Having a DUNS number makes your business seem much more legitimate to lenders, especially if your score is favorable.
It’s also always a good idea to monitor your business credit just as you would your personal credit and look out for instances of credit fraud.
Apply for a Small Business Association Loan
The Small Business Association (SBA) has the ability to offer loans to many small businesses who would otherwise not qualify for a traditional bank loan. Many local banks and other lending establishments participate in SBA lending; all you have to do is ask.
The SBA offers many types of loans, including:
- Loans for Starting and Expanding Businesses
- Disaster Loans
- Export Assistance Loans
- Veteran and Military Community Loans
- Special Purpose Loans, like CAPLines and CAIP
Seek a Peer to Peer Loan
Peer to Peer (P2P) loans are provided by individual “peers” who are unrelated to the person seeking the loan. This type of loan is typically unsecured and are only made to individuals. Using an online software, credit scores are checked and bids of interests rates are placed by potential lenders in a reverse auction format. Two of the most popular lenders of this type of service are Prosper and Lending Club
Last Resort: Cash Advance Loan
Even in your personal life, cash advance loans should be a last resort. As Singer explains in his article, this option should only be used on projects that are close to completion and highly profitable. Cash Advance loans have extremely high interest rates.
Contractors Should Be Aware of Alternative Funding Sources for Project |ENR
Why Your Business Needs to Get a DUNs Number | U.S. Small Business Association
Tracking your construction project’s submittals and their approval status can be a tedious and frustrating process, but thankfully several project management applications are helping solve that issue with technology. At the beginning of this year, PlanGrid announced the release of an automatic submittal log creator tool, which scans through your project’s specification book and creates a trackable log of each submittal. The company has recently added several new features to make the Submittal platform, which allows users to manipulate the submittal log, even more useful.