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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.
The best type of business loan depends on what your business needs to finance and what it can qualify for. These five types of financing are typically available to the construction industry and types fill common needs.
We also added our choice for the best provider of that type of loan, based on rates, terms and loan amounts available. And we also made sure that construction businesses were eligible.
The Small Business Administration (SBA) offers government-backed financing to businesses that have struggled to qualify for a bank loan. Since construction is considered a risky industry, SBA loans might offer the lowest rates you're able to qualify for.
The SBA 7(a) program offers general-use term loans that can be particularly useful for buying equipment, building a new office, consolidating high-interest debt or buying out a competitor. You can also use them to buy an existing construction business. It also offers government-backed lines of credit with special programs for filling contracts, building or renovating real estate and seasonal businesses.
But save SBA loans for large, future projects. The application is time-consuming and it can take months to receive your funds. You also generally need to good credit and at least three years in business to qualify.
SmartBiz business loans
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.
| Loan amount | $30,000 – $5,000,000 |
|---|---|
| APR | 8.99% to 24.99% |
| Min. Credit Score | 660 |
Equipment financing includes loans and leases to buy the equipment your business needs to complete a construction project. You can typically borrow between 80% and 100% of the equipment's value — though some companies offer as much as 400%. Typically, terms are based on how long the lender thinks the equipment will be useful.
Because collateral is built into the loan, this is one of the easiest type of financing to qualify for, even as a new business or with bad credit. The collateral also makes it easier to qualify for a low rate compared to other types of financing.
National Funding business loans
National Funding specializes in equipment financing and working capital loans for industries that might struggle to qualify elsewhere — including construction. You can borrow up to 400% of your equipment's value and repay it over a term of five years. But it isn't transparent about the cost of its equipment loans.
| Loan amount | $5,000 – $500,000 |
|---|---|
| APR | Not stated |
| Min. Credit Score | 600 |
A line of credit offers your company access to cash as needed to cover a long-term project. These are best for working capital expenses when you're filling a contract, after you've bought your equipment and the basic supplies you know you'll need.
SBA CAPlines are a great option for large projects. But if you can't qualify for an SBA loan, consider an online lender. They're more likely to work with construction businesses than a bank and often accept fair or bad credit. They're also typically faster and easier to manage than a bank credit line.
Bluevine business loans
This online lender offers lines of credit 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 cash flow.
| Loan amount | $5,000 – $250,000 |
|---|---|
| APR | Estimated 8% to 86% |
| Min. Credit Score | 600 |
Invoice financing gives you an advance on your client's unpaid invoices when you need funds to complete the job. Typically you can receive up to 85% to 100% of your invoice's value upfront. And when your clients pay their invoices, you pay off your advance. Usually invoice financing charge a monthly rate of around 3% to 5% of the advance.
One benefit of invoice financing is that eligibility is often based on your client's credit — not yours. You also don't typically need to be in business for a specific amount of time.
Fundbox lines of credit
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. It's simple to apply — it looks at your accounting software and bank account rather than requiring lots of documents. But it charges high late fees and weekly repayments.
| Loan amount | $1,000 – $150,000 |
|---|---|
| APR | Not stated |
| Min. Credit Score | 570 |
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Short-term business loans give you a lump sum that you pay plus installments over six to 18 months. They’re often available to high-risk industries like construction. They’re also usually friendly to newly established businesses and bad credit borrowers. And you can get funded within a few days.
But unlike other term loans, short-term loans often come with daily or weekly payments, which can be inflexible. They also tend to be one of the more expensive options. In some cases, lenders charge rates and fees equivalent to an APR over 300%.
Fora Financial business loans
Fora Financial offers construction-friendly short-term loans with relatively low fees compared to other similar providers. You only need to be in business for six months and make over $140,000 in annual revenue to qualify. It also accepts owners with bad credit. But like many short-term lenders, it’s not transparent about the cost of its loans on its website. And you’ll have to make payments every week or even every day.
| Loan amount | $5,000 – $750,000 |
|---|---|
| APR | Varies |
| Min. Credit Score | 670 |
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.
Check out options by selecting information about the loan you're looking for, time in business and credit score.
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 guide to business loans.
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