Editor's choice: SmartBiz business loans
- Large network of SBA lenders
- Low potential APR
- Loans from $30,000-$5,000,000
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Lenders consider construction a high-risk industry, which can make it tricky for you to get the financing you need for the materials and labor to complete your work. You might have trouble getting a prime-rate term loan from a bank. But you’ll find funding options available to construction companies that can help your business grow.
SmartBiz isn't a lender but it can connect you with banks that offer SBA loans to contractors. Its platform makes it easy to find a lender. And if you sign up for its packaging service, you can cut the application time down from months to weeks. But these services aren't free — you'll pay a broker and packaging fee.
|Min. Loan Amount||$30,000|
|Max. Loan Amount||$5,000,000|
|APR||4.75% to 7.00%|
|Interest Rate Type||Variable|
|Min. Credit Score||650|
|Minimum Loan Term||120 months|
|Maximum Loan Term||300 months|
This online lender offers lines of credit up that contractors can use to fund projects with unpredictable expenses and other working capital costs. Rates start relatively low — especially for a lender that works with fair credit and businesses that have been around for less than a year. But it comes with weekly repayments, which might be difficult to manage if you have gaps in your business's cashflow.
|Min. Loan Amount||$5,000|
|Max. Loan Amount||$5,000,000|
|Interest Rate Type||Fixed|
|Min. Credit Score||600|
|Minimum Loan Term||6 months|
|Maximum Loan Term||12 months|
Fundbox can finance up to 100% of your unpaid invoice's values. Rather than looking at your personal credit, it considers the overall financial health of your construction company. Its simple to apply — it looks at your acounting software and bank account rather than requiring lots of documents. But it charges high late fees and weekly repayments.
|Min. Loan Amount||$1,000|
|Max. Loan Amount||$100,000|
|Interest Rate Type||Fixed|
|Min. Credit Score||500|
|Minimum Loan Term||3 months|
|Maximum Loan Term||6 months|
|Turnaround Time||As soon as 1 business day|
We looked for providers that offered the main types of financing that construction businesses and contractors could benefit from — such as SBA and equipment loans. We weighed the rates, terms and loan amounts available with each lender. And we also made sure that construction businesses were eligible.
Loans backed by the Small Business Administration are open to contractors and come with some of the most competitive rates out there. The SBA’s Contract CAPLine program is designed to help you complete a project or job, while its 7(a) program could provide a source of affordable working capital.
But SBA loans take time and effort, and they have of the lowest acceptance rates among other types of financing.
You might want to also consider other types of loans that include:
Finding the right loan offer starts with narrowing down the right type of financing:
Also consider your priorities. If you need money now, a short-term loan or line of credit could your fastest choices. A Contract CAPLine can help you save on interest and fees if you have time to dedicate to the long application process.
Costs, loan amounts and limitations on how you can use your funds are all factors you might also want to consider.
Finding a loan you’re eligible for can be tough for contractors because lenders consider construction to be a risky business. Before seriously considering a loan, make sure your business is eligible for it.
From training crew to investing in marketing, a business loan can help you pay for a variety of expenses:
The documents and information you need to apply can vary widely depending on the loan, the lender and your business’s finances.
SBA loans are notorious for their laundry list of required information, including documentation of any run-ins with the law. Others are a lot less involved, asking for:
Construction isn’t like any other businesses. “Contract” is in its name, making it hard to predict future revenue — or whether your business will be around before your loan term is up. That’s why some lenders aren’t as willing to work with contractors as they are with businesses in more stable industries.
Not all lenders list the industries they’re willing to work with, so contact customer service first to make sure your company is eligible. You might also consider backing your loan with collateral or a lien on your business or personal assets to offset some of the risk.
Businesses that aren’t yet a year old will face a tougher process: Lenders prefer to work with companies that have experience. Bad personal credit can also hurt your application. In these cases, backing your loan with collateral could help, though you might only qualify for more expensive types of financing, like short-term loans or factoring.
Is your construction company just getting off the ground or looking for ways to grow? Here are a few pointers to help your business stay around for the long haul.
Getting a loan is often harder for contractors than businesses in other industries. Equipment financing and SBA loans can be your least expensive options, though they might not be right for your specific needs.
Learn about other types of financing designed for your industry in our comprehensive guide to business loans.
Image source: shutterstock.com
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