5 ways to finance your construction company
When we look around, most of our visual arena is filled with skyscrapers, societies, high towers, corporates etc. We are not ignorant of the fact that the world is turning into a concrete jungle. The population keeps rising steadily, which leads to an increased demand for residences, jobs, schools and so on; all of which require construction.
Construction is an important indicator of the development of any place. It reflects how advanced urbanization is. The construction industry has contributed around USD 131 billion to the national GDP at factor cost in 2011–12.
It is a basic economic law of how utility determines demand. The world population has been projected to be 7.87 billion according to the 2021 statistics, and everyone needs shelter. Construction is a prerequisite for a basic need of humans- shelter. Therefore, if you are thinking of starting a construction company; you don’t have to think twice.
Construction companies are an enterprise or an organization that operates for the construction of a variety of buildings, apartment, infrastructure, developments, properties, facilities, housing, path, pavement, roads, motorway, and other types of construction projects.
However, just having a thought of starting a business and actually executing the thought are two very different things. You need to gather resources, conduct extensive research, take the help of experts and most importantly manage finances.
Several costs are attached to the construction business – equipment, payroll, office space, late payments from clients are just a few. How do you tackle all of this efficiently?
Here are 5 ways of financing that will help you develop your construction company:
1. Bank and SBA loans
Whenever the thought of taking a loan strikes the mind, Bank is the safest and most secure option that is thought of. SBA and other bank loans despite being a traditional choice continue to be a very favourable option. With a variety of loan plans available, flexible terms, low interest rates, they are a sturdy alternative for entrepreneurs wishing to establish a construction business.
Since the financial crash of 2008, they have been a little hesitant on financing. Getting approved, however, might be challenging when it comes to banks. You need to have a diligent credit score, and years of spotless trading history to secure a loan. A lot of paperwork is also involved which can be time-consuming and frustrating. In case of unexpected circumstances, you might have to pay back 85 percent of the loan; no matter what position you are in. Despite all of this, it is a very practical option to consider due to the assured authenticity.
2. Equipment financing
Equipment are the ABC’S of construction. Without it, you cannot begin the process of construction no matter what. The equipment, however, can charge you quite a fortune. Not only is the purchasing amount expensive but the costs involved in maintaining and repairing can also cause a strain. To solve this problem; There are professionals who lease out these equipment on monthly basis. This includes everything from cement trucks to bulldozers. Machinery is treated as collateral, which implies if you fail to repay, they will be taken away and auctioned off. You become the temporary owner of the equipment as long as you pay the monthly rent. This is not only a cheaper and better option but also reduces the sudden monetary strain that is caused to an individual when investing in equipment. When the expense is divided monthly, it eases out the process.
3. Financial lending start-ups
There are several agencies willing to support your dream venture. They provide loans to help you manage the funding and offer various plans from which you can select. The interest charged is not exorbitant contrary to the traditional money lenders. Another additional advantage of financial lending start-ups is how swiftly the finances reach you. You can get approved and receive the amount within a very short span whereby you can cover weekly payroll costs or unexpected expenses.
Investors in the market aren’t just for the fancy businesses out there. There are several investors who would like to support your construction company dream. Most of the time, the investors investing capital in construction are former savants of the construction field. If so, they can act as mentors and help your company thrive by their resourcefulness and assistance in important decisions.
5. Business term loan
If one doesn’t qualify for the SBA loan; no matter how likely it seems but that is not the end of the road. Bank loans can take time to process, business term loans are processed really fast. Therefore, if you are stuck in a situation of monetary emergency; business term loans will serve you well. The interest rates vary from lender to lender and a lot of other factors. Therefore, you need to thoroughly enquire to avoid any miscommunication and future troubles.
Construction is a thriving sector. Not only do new residences or buildings require construction teams and equipment but today even re-constructed infrastructure requires construction. Architects design, builders approve, and constructors are the ones who truly create.
Lastly, as long as people live, construction shall not die.