The Different Types Of Business Loans For Construction Companies

The construction industry operates in a different way to other sectors. Construction projects are taken on by firms, often requiring a significant amount of capital, and they often do not get paid the full amount until the project is completed. This can often mean construction companies need to source funding from other areas.

If funding is managed correctly it can help to drive the business forward, expand at a suitable pace and deal with any emergencies that may arise (especially considering the fact that the construction industry is particularly susceptible to the vagaries of spiralling costs and supply chain issues). There are many different types of business loans for construction companies, with some types of financing more suited to different stages of the process. Below you can find more information about how to get a loan for your construction business and exactly what type of SME business loan would be suitable for your specific requirements.

Invoice Finance

Construction firms often have multiple invoices outstanding at any one time, and this can be used to secure a type of funding known as invoice financing. This allows firms to access up to 90% of the value of outstanding invoices or applications for payment within 24-48 hours. This can help them to bridge the gap between completing work and receiving payment, keeping the business moving even when they’re waiting for payment.

Equipment Financing

This type of loan spreads the costs of expensive equipment and machines over a more manageable period of time. In the construction industry it can often be very costly to procure everything you to need to see a project to completion, but machines such as forklifts, bulldozers, and lifters are all necessary for firms to work faster and more efficiently. Using this type of financing, businesses can get access to the machinery they need to complete the project without the associated high upfront costs. And it’s not just heavy machinery, equipment financing can also be used to purchase company vehicles, office furniture, tech equipment and more.

Tailored Loans

No two businesses are the same, so why should funding options not offer bespoke finance to help them meet their needs? Tailored loans are designed to support building contractors and subcontractors, enabling them to fund projects without delays that are often caused by lack of funds. These kinds of tailored loans can cover extended periods, often between the start and conclusion of a project or even spanning multiple projects.

Secured Loans

Secured loans use company assets as collateral, such as property or vehicles, to provide assurance to lenders that the full term of the repayments will be met. Because this security is in place, these types of loans can provide larger amounts of funding and often with more favourable terms. This makes them suitable for bigger construction projects or expansion, when larger sums of money are required.

Working Capital Loan

This is a shorter-term finance option generally utilised to provide funds for day-to-day operations. This could be for covering expenses like payroll and overhead costs, or meeting the rising costs of materials. A working capital loan is also a good way of maintaining cash flow during slow periods.

Check your eligibility for a business loan or speak to a member of our team about our specialist construction business loan options.