There are a lot of costs associated with starting a construction or field service business. From equipment to payroll to renting office space, the monthly bill certainly isn’t cheap. On top of that, a handful of clients being late to pay (something not uncommon in construction) could cause you to miss payroll or dip into your savings—possibly leading you into a financial downward spiral.
While bootstrapping, or self-financing, is certainly the best overall option when it comes to funding your construction company or projects, for many it simply isn’t a possibility. This is why many people turn to financing options to help launch their business, or to fund a new venture within an already-established company, such as purchasing new equipment or expanding departments.
#1. Equipment Financing
There are financing options available for construction professionals outside of monetary lending. One is equipment financing. With this option, lenders lease out expensive equipment, from cement trucks to bulldozers, and the recipients pay as they go.
There are financing options available for construction professionals outside of monetary lending.
As long as you can make the monthly payments for the equipment, you’ll have access to it until you pay it off and become the owner. For those in need of certain equipment to give your business a refresher or take you to the next level, equipment financing might be your best bet.
#2. Financial Lending Startups
Third parties exist now in addition to more traditional vendors to help finance your business. Two examples are Kabbage and BlueVine, which provide loans up to $250,000 for small business owners across a wide variety of industries. These startups generally have low to moderate interest rates.
One of the positive aspects of this option is the speed at which you can get approved and gain access to your funds. In some instances, you can finish the process in as little as a couple days, making it a convenient way to cover weekly payroll costs or unexpected expenses. Some potential downsides to this option are needing excellent credit to get approved for the loans, as well as the moderate interest rates attached to the funds.
Investors aren’t just for hip tech startups. There are plenty of early-stage investors, known as angel investors, who specialize in all different types of industries. To find them, you can search through the Construction section on AngelList here, or on LinkedIn by searching by job title (“construction angel investor” or “construction investor”).
Investors are a terrific option for any business owner looking for more than just a blank check. Oftentimes, investors are former construction or field service savants who were successful in the industry—making them a great resource for mentorship or guidance when it comes to business decisions.
One of the cons of this choice, obviously, is that it can be difficult to get in touch with investors and land their funds. On top of that, the exchange of money often involves giving up some sort of equity or stake in your company. So, if you want complete ownership of your company, investors wouldn’t be the best route to take.
#4. Bank and SBA Loans
SBA and other bank loans are among the most popular options for financing construction ventures. Given their flexible terms, low interest rates, and wide variety of loan amounts, they’re a particularly solid alternative for entrepreneurs looking to launch a construction business.
The cons? Getting approved for one can be pretty tough given both the personal and business credit requirements. Also, in the event your business closes doors or comes upon unfavorable circumstances like financial hardship, you’ll need to personally pay back at least 85 percent of the loan out of pocket.
While money doesn’t grow on trees, luckily, there are plenty of options out there for anyone trying to launch or give a financial boost to their construction business.
#5. Business Term Loans
Business term loans are a good choice for those who don’t meet the requirements to qualify for an SBA loan. The lump sums of business term loans are generally handed out faster than banks loans as well, so if you’re in a position where you need the money fast, this could be a nice fit. Much like other forms of loans, the interest rates vary far and wide from lender to lender and situation to situation, so be sure to weigh your options before signing the dotted line.
While money doesn’t grow on trees, luckily, there are plenty of options out there for anyone trying to launch or give a financial boost to their construction business. Before jumping into one option or the other, though, be sure to do your research to see which works best for you.