Many banks and financial institutions aren’t comfortable with extending loans to construction companies and usually lend to bigger construction companies when they do. This may put smaller construction companies and subcontractors at a loss when it comes to securing funding to run their small businesses. Even small construction companies need funding to pay salaries, and purchase tools and other equipment needed to operate a construction business. Fortunately, smaller construction companies and subcontractors have other options that they can explore when it comes to finding financing for their construction business. 

The Small Business Association (SBA)

The small business association is a good option for small construction businesses because the SBA is a government-based company designed to help both small and midsized businesses. The SBA isn’t a loan company per se, but a guarantor. The SBA can guarantee a loan for a bank, allowing banks to loan to smaller businesses. The guarantee works as an incentive to motivate a bank to loan to a smaller company. 

Supplier Financing

As a construction company, it’s obvious that suppliers are a huge source of your success in your ability to finish projects on time. However, you may need supplies before you’ve been paid by your clients which can slow down construction and create problems for smaller businesses. Supplier financing puts an end to this kind of problem by allowing you to finance your supplies and pay them off slowly. This allows your construction company to finish projects without waiting on the funds needed to order more supplies. You order your supplies and a finance company pays the supplier. The finance company later collects the funds within 90 days. Most supplier financing programs are open to companies that bill/invoice at least $500K. 

Merchant Cash Advances (MCA)

If you own a construction company that needs money in a pinch, an MCA may be a good option. However, construction businesses should keep in mind that MCAs are typically a high-interest form of funding that must be paid back quickly. The benefits of an MCA include the quick release of funding and the relative ease when it comes to acquiring them. These are a few ways that smaller construction companies can acquire funding for their projects. However, there are many.