4 Reasons Why Construction Companies Need Business Loans

May 6, 2020

Oftentimes, construction company owners need to streamline their business operations and perform cuts in their budgets in order to accommodate or complete projects. There also comes a time where they have to bid lower just to win a project and secure work.

Because of this, many generate lower profits as revenue coming into their company drops. However, with construction business loans for contractors, they are able to take on larger and more profitable projects without cutting costs.

The construction industry is cyclical and dependent upon many different variables. Factors such as housing data, industry trends, and the US economy as a whole are prone to changes that can affect the business operations of a construction company. This is why even if you currently don’t need back-up financing, it’s always wise to apply for funding before your company begins to experience cash flow issues.

Here are some reasons why contractors should apply for construction business loans.

  1. To Finance Needed Equipment

Construction companies need and make use of large equipment in their business operations. Bulldozers, backhoes, loaders, dump trucks, and cranes are expensive. If companies choose to finance it out of their pockets, it often creates a huge gap in their cash flow.

 

While most construction businesses may opt to lease equipment as opposed to buying them, they will eventually realize that it makes more sense to buy, rather than continue leasing. This is why a majority of construction companies choose to take out financing loans.

 

Consider this: If A new bulldozer cost around $50,000 and a construction company is charged around $3,000 to $4,000 each month for rental, and a construction project runs for 12 months, the company ends up paying $48,000 in rental fees. This expenditure almost equals the price of brand-new bulldozer.

 

On the other hand, if the company had financing in place, they would have been in a position to purchase the needed piece of equipment, and at the conclusion of the project, owned a valuable asset that would on a moving forward basis decrease overhead, and increase their revenue and profits on future projects.

 

  1. Market the Company to Widen Customer Base

In today’s world, without proper marketing strategies, there is no way a construction business can survive. Although word of mouth is an ideal way to market your business, it just isn’t practical any longer. If you want to generate leads and increase your company’s revenue, then your best bet is to invest in, and carry out a proactive marketing plan.

 

Marketing today generally focuses on promoting a business on the internet. Having a fully optimized website increases your chances of attracting customers and landing new projects. While SEO can be pricey, it’s a good investment that will generate a healthy ROI long term.

 

If you are not budgeting for marketing, best you begin sooner than later, because the odds are, your competitors have gotten the jump on you in the marketplace, for the simple reason, they are already promoting their companies.

 

  1. Pay the Bills

One of the difficulties many companies face, including those in the construction industry, is gaps in their cash flow. Since payment for a project is not forthcoming until a job is completed, it can be difficult for them to pay their staff. However, expenses and payables continue to pile up unbated.

 

Without back-up financing, your business can become knee-deep in debt.

Small business loans provide construction business owners with money needed to fulfill your financial obligations in a timely manner. Making your payments on time allows you to build a good credit history, which in turn helps increase the probability you will be approved for loans in the future.

 

  1. Finance Existing and New Projects

As you continue on with your business, the odds are, you will acquire additional projects from your existing clients. This means in order to accommodate them; you’ll need additional funds to finance your projects.

 

The problem is, in most cases the funding you need won’t be available until the end of the month. Instead of waiting for the money to arrive, contractors often find it more practical to apply for business loans so as to avoid the delay.

 

Construction loans provide companies with needed funds so they can acquire construction materials, as well as pay for labor, and other miscellaneous fees.

Construction Business Loans for Contractors is a Major Key to Your Company’s Success

It’s no secret that a major key behind every successful construction company is in its ability to build and maintain a strong cash flow position. Through construction business loans for contractors, business owners finally have a chance to pay for their equipment, bills, staff, and fund bigger projects without worrying about the impact it will have on their cash flow, which is not only a big relief, but also a major win.

JJ Sterling
As the co-founder of Urban Splatter and an architecture graduate from Chicago, I thrive on crafting a digital nexus where architectural innovation intersects with boundless digital opportunity. My academic roots in the Windy City's rich architectural tapestry inspire a unique vision for Urban Splatter's journey into the ever-evolving digital frontier of design. Join us as we navigate the exciting confluence of structure, style, and technology.

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