This is part three in a five-part series concerning Steps to Scaling Your Construction Contracting Business. You can see the introduction to the series by clicking here.
Because you aren’t likely to be a trust fund baby, chances are great you’ll need to find a financing option to grow, expand, or scale your construction contracting business sooner or later.
And, if you need an infusion of cash “like yesterday” there are alternatives for finding folks who will help finance your business “like today.” But, if you’re willing to prepare now for future growth and expansion your opportunities for receiving better or more favorable terms are greatly increased.
With that said, now is the time to begin getting your ducks in a row.
Down to brass tacks
The folks who will consider loaning to you will be concerned with:
How long you’ve owned your construction contracting business
Your personal credit scores
The gross annual revenues for your business
Your businesses net annual profits
Whether or not you have collateral to back the loan
Ask yourself some questions
The initial part of the process will be understanding the kind of capital you need to support growth for your business. You’ll need to ask questions like:
What for? (Whether you need the funds for payroll, materials, or equipment will likely affect not only your ability to find financing at all, it will also play a role in the rate of interest you’ll have to pay.)
More hard-hitting questions
No matter how much you need to borrow or how you’ll use the funds, there are other things to consider before applying for a loan.
What will the total cost be to repay? (principal, fees, interest)
How long will it take to repay?
What will be the amount of the monthly payments?
If you pay late or default, what will the penalty be?
What impact will the loan have on your total financial package?
Are you willing to put in the time to do the back-office stuff in order to get better rates or terms?
An excellent article from Purch, written by Karina Fabian, and titled Financing Your Construction Business clues you into an array of options available, including alternative lenders. Near the bottom of the article, Fabian gives a list of documents you’ll need to have ready when applying. Getting these documents together will likely take time and persistence, yet preparing now (before you need the funds) will pay off in the long run.
Your call to action:
Get your budget set up and rolling. Take the necessary steps to be sure your credit scores are the best they can be. Be sure your accounting records are up to date and clear. Begin compiling the documents suggested by Fabian.