Business Loans & Financing For Construction Companies

What is a construction business loan?

Construction projects can have a hefty price tag for the customer as well as the builder or construction company. A construction business loan can provide a more affordable option to finance the direct costs associated with building projects.

How do you finance a construction project?

Financing a construction project can be simplified using primerates.com. Simply visit primerates.com and fill out your application. Within minutes you will be connected to multiple lenders that can potentially provide the money you need!

Do you need a downpayment for a construction loan?

An average minimum down payment of 20% – 25% can be expected with most construction loans. Depending on the type of loan you may be required to use collateral instead of a cash down payment. It’s important to do your research and select the loan that works best for your situation.

What are the requirements for a construction business loan?

Different lenders and loan types can have varying requirements for a construction business loan. Prior to applying you should gather your income and tax records. In addition, you should prepare documentation showing the legitimacy of your business. Taking these steps can help speed up the approval process and increase your chances of approval.

Is a construction business loan a good idea?

A construction business loan can be a good idea as long as it’s managed properly. It can allow your business to grow and revenues to increase quickly.

Pros

• Allows you to buy your own equipment
• Complete more projects, earn more revenues
• Affordable payment plans
• Expand your company faster

Cons

• Taking on debt
• Interest and fees

Options for Financing Your Construction Business

SBA Loans

Small Business Administration (SBA) is a government resource that can provide construction business loans.

Pros

• Very accessible for securing capital
• Helps businesses without collateral
• Works with startups
• Lower monthly payments
• Longer loan maturities
• Typically structured without balloon payments
• Lower down payments

Cons

• Higher interest rates
• More paperwork
• More time is required for documentation and approval process
• Longer funding time
• Loans are often secured with any property owned by the business owner

SmartBiz

» MORE: SmartBiz SBA Loan Review

Revenue-Based Financing

Revenue-based financing can be helpful to startups or unproven business models that need funding. Revenue-based financing can allow companies to promise an agreed-upon percentage of future revenue.

Pros

• No company equity required
• Significant investor funding
• Payments based on a percentage of monthly revenue
• Receive money upfront
• Faster approval time

Cons

• Must have a business portfolio prepared
• Minimum requirements may be difficult to meet
• Lack of regulation
• Some lenders can impose high-interest rate

FundBox

» MORE: FundBox Business Loan Review

Line of Credit

Construction companies can take advantage of credit lines offered by financial institutions. A line of credit can be used for various purposes by the borrower.

Pros

• More permanent funding solution
• Money can be drawn at any time up to the agreed-upon limit
• Ideal for balancing cash flow
• Only pay interest on the amount you use
• Improves business adaptability
• Builds business credit

Cons

• Pay-as-you-go format means fees can add up quickly
• Difficult to qualify for
• Low borrowing limits compared to other options
• Risk for misuse of loan

StreetShares

» MORE: StreetShares Business Loan Review

Commercial Loans

New business endeavors are commonly funded by commercial loans. They can be a good option for small construction businesses that need funding.

Pros

• Lower interest rates
• Flexible options
• Long-term loans often between 3 – 10 years
• Extended payment plans
• Large sums of money
• Unsecured, no collateral required in most cases
• You retain ownership of the company

Cons

• Challenging to qualify for funding
• Excellent business credit is typically required
• Personal financial history required
• Less autonomy than other options

Funding Circle

Funding Circle is another peer-to-peer lending option that highlights credible investors and over $7 billion dollars invested. 

Pros

• Quick online application
• Secured loans
• Transparent terms
• Backed by more credible investors
• Use loan proceeds for almost any business purpose

Cons

• Lien on business assets required
• Personal guarantee from owners required

» MORE: Funding Circle Business Loan Review

SmartBiz

» MORE: SmartBiz SBA Loan Review

Peer-to-Peer Lending

Person-to-person or peer-to-peer lending is an online lending option that connects borrowers and lenders.

Pros

• Generous loan amounts
• Easy and quick online application process
• Fixed interest rates and payments
• No prepayment penalty
• Unsecured loans, no collateral required

Cons

• More ideal for good credit borrowers
• Bad credit borrowers can receive high interest rates
• No government insurance or protection
• Some jurisdictions don’t allow p2p lending

LendingClub

LendingClub is a peer-to-peer lending giant that offers fast-approved loans with reasonable interest rates.

Pros

• Clear terms outlined prior to signing up for a loan
• Well established pattern of service
• 36- or 60-month terms
• Information easily accessible on their website
• Receive pre-approved offer in minutes
• Easily apply online
• Loans usually funded in less than 10 days
• Competitive interest rates between 6 to 30 percent
• Nationwide availability for most types of credit

Cons

• Application process may require copies of tax documentation
• Passes accounts into collection quickly after missed payment
• Unsecured loans only

» MORE: LendingClub Business Loans Review

Upstart

Upstart is a peer-to-peer lending option that can offer funding for construction business loans. Upstart can be differentiated by its unique approval process that considers factors other than just your credit score.

Pros

• Good chance of approval
• Quick funding
• Competitive interest rates between 9.57% – 29.99%
• Generous loan amounts between $1,000 – $50,000

Cons

• Some states have minimum loan amount
• Fees can be costly
• Prepayment penalty can apply

Prosper

Founded in 2005, Prosper was one of the very first peer-to-peer lending marketplaces within the United States.

Pros

• Fixed terms (2-year and 5-year option)
• No early payment penalties
• No minimum income requirement
• No hidden fees
• Easy application process

Cons

• Minimum credit score of 640
• Payment schedule cannot be adjusted
• Maximum loan amount $35,000

Conclusion

Ready to take your business to the next level using a construction business loan? Submit one loan application at primerates.com and get connected to multiple lenders within minutes. Primerates.com allows you to receive more competitive offers, easily compare lenders, and save hours of time. Ready, set, save, and apply today at primerates.com.