The Ultimate Guide to the Best Construction Business Loans for Building Contractors

October 26, 2022 EC Funding

You’ve taken the leap into entrepreneurship and business is booming. This is great news for any industry. For construction companies, it means needing cash on hand to fund multiple jobs at a time.

Yes, there is plenty of money to be made with a high demand for contractors. In between getting the job, completing it, and the client paying, there are still expenses to cover. Your workers need to be paid and suppliers want their money. Not to mention, you still have the day-to-day costs of operating a business.

Unless you get to a point where you can start building equity in your business, things can get tight. You can find yourself in a financial crisis if the following occur.

  • If a client doesn’t pay in a timely manner
  • Any ongoing disputes

Applying for an SBA loan through the small business administration takes time and you may not qualify. Then what?

Click here for a guide to construction business loans when you’re in a bind.

What are Construction Business Loans?

There are different types of construction loans. Most are designed to provide cash to construction companies to fund large projects or cover other operating expenses. You may have heard it referred to as working capital loans.

Due to the nature of the construction industry, it is vital to the health of the business to have money readily available. Things can change in an instance. One week you may be able to cover a few jobs. The next week a project that could change your life comes available.

Having access to capital to meet the demands is at the point construction companies struggle. The cost struggle happens the time of business growth.

Whether it is covering project costs, meeting payroll, or meeting monthly expenses, companies now have options. Here are some of the best construction loans available.

How to Position Yourself for a Loan

The way to get the attention of the best construction loan lenders is to be a suitable borrower. To do this you must stay abreast of your financial health.

First and foremost, work on improving your credit score. Get your annual credit report and review for any irregularities. If there are past due or charged off accounts, work with creditors to become current or have the debt removed.

Incorporate your business for legal purposes, like obtaining a business bank account. A banking relationship can help with loan approval.

Invest in accounting software to track your business expenses. They also provide financial reports most lenders will require.

Last, claim all income and file accurate tax returns. If you can show business growth over several years you will improve your chances of getting a loan.

Small Business Loans

In the ideal setting, a business owner could walk in a bank and apply for a small business loan and get the money needed. All he would need is proof that money will be paid back.

Unfortunately, a business loan through a traditional bank or the SBA is harder than securing a personal loan. Despite how well your business may be doing, you will need to jump through many hoops to get construction business loans.

To apply you will first need to have a good credit score. This alone will knock a lot of people out of contention. You will also need to have been in business for a set length of time and be able to present a pretty solid business plan.

There will be instances where you will need to provide collateral. This could be business equipment, property your business owns, or even your personal home.

Business loans through the SBA will not work for a quick infusion of cash. Their average closing can take 60 to 90 days.

Home Equity Loan

Owning a home can be a good source for a business owner in need of cash. Be your own lender by taking out the equity in your home. This is a good option for someone who plans to be in business for a while.

These types of construction loans may be better for you than you think. Construction projects tend to fluctuate. You will have your set monthly mortgage payment, but when business is really good you can pay more towards the principal balance. This way you rebuild your equity faster.

Another benefit to using home equity to finance your business is that you avoid having a separate monthly bill. Plus your interest rates will be much lower.

Use Business Credit Cards

If you are tossing those business credit card offers in the trash, stop. Having available lines of credit on credit cards can help with you need to cover expenses. Apply for the card and then tuck them away for when you really need them.

A credit card can come in handy to pay for building supplies and to even cover monthly expenses like phone bills, gas, and office supplies.

Most credit cards allow for cash advances up to the full available balance. Use this as a short-term loan. Pull the money off the cards to meet immediate financial needs. Once you receive payment for a job and cover expenses, use the remainder to pay off the balances on the credit cards.

Equipment Financing

A construction company cannot operate with equipment. Such as, stucco mixers, excavation machinery, scaffolding and generators are essential equipment. A lot of money is spent renting equipment for bigger jobs.

You can face big delays or lose out on a job if you get to the equipment rental company and they are out of what you need. This is where equipment financing comes into play.

Having your own equipment gets your workers out the door faster. Although the expense is great, it will pay for itself over time.

Our equipment financing programs come with lower interest rates, a quick turnaround, and flexible repayment options. We also offer equipment refinancing.

Accounts Receivable Financing

If your cash flow problems are the result of slow paying customers, this is one of several types of construction loans to consider. Accounts Receivable financing allow construction companies to borrow against outstanding invoices.

To qualify, you will need to prove you have a consistent flow of business. The lender will also want to know that you have a steady clientele of commercial business. The loan is for invoices with a net 90-day term, and not outstanding invoices where the customer just hasn’t paid.

Similar to a line of credit, the business only uses what they need at the moment. Loans typically have a repayment period of six months but could require weekly payments. Interest rates are typically not that high and will vary depending on business earning potential.

Working Capital Loan

A working capital loan is a short-term loan that can be used for any business expense. These loans get money into the hands of construction companies quickly. Because they are short-term loans, the repayment period will be a year or less.

The pros include a fast approval, no early repayment penalty, and you may be able to get financing up to $150,000 with some lenders. If you have a good credit score you will receive a low interest rate.

Lenders will require business bank statements. You will need to show monthly deposits in your account totaling an amount set by the lender.

The cons, payments are usually deducted from your bank account on a weekly basis. If you can handle that without running into more financial hardship, this may be the best construction loans for you. The loan works best for contractors who are looking for cash to bridge a financial gap between payments.

Look for Investors

The best construction loans could very well come from the people that know you best. Your friends and family. As a business owner, you have to conduct yourself differently than if you are just Joe.

Develop a presentation equipped with financials and a repayment plan. Make a list of people who are likely to have cash available to make a loan. Narrow it down to those who you believe would actually make a loan to you.

Invite them to lunch to present your presentation. Let them know the rewards of doing a short-term investment into your company. Don’t say you would be helping your son, daughter, or friend, make it about the return on their investment

If you don’t have any takers, consider crowdfunding sites for small business. By going this route you have a bigger pool of potential investors. Plus, marketing tools using social media to promote and share your campaign.

Could You Use a Business Loan?

You’ve worked hard for your business and the opportunities you’ve been given. There is no reason to turn down jobs because of limited cash on hand.

If you haven’t qualified for a small business loan with the SBA, taking out a working capital loan can get you the money you need. Pay your loans according to the terms agreed upon and improve your creditworthiness.

Help is available when your construction business needs it the most.

We Are Here to Help

Express Capital Funding offers loans for equipment purchases and day to day expenses. Our construction business loans are designed for small businesses like yours.

Visit our website today to see the options available to keep your business operations on track.


If you have any questions on how Working Capital can help your cash flow or to learn more, please give us a call at 888-513-9937.