Operating a construction business typically requires a constant supply of finance. Some construction businesses have collapsed due to poor financial strategies employed by entrepreneurs. A visionary business owner doesn’t have to rely on the cash inflows for every aspect of a business operation. Small business loans usually chip in during financial difficulties to offer adequate funding required for maintaining the smooth running of a business. Here’s a description of how rapidly the construction business in Australia is expanding and how the construction businesses can best use a variety of small business loans:
How rapidly the construction business is expanding and transforming innovatively
The construction business in Australia has been growing steadily for over a year. This has mainly been instigated by the strength in the approval of Australian residential building and the continued strength in commercial and engineering construction. According to a survey by the Ai Group, the activity levels in the construction business grew at a rapid pace, especially for housing construction. Its strong rate of growth is associated with an increase in demand and backlog of work.
Image Source: Unsplash
The activity level is also growing across all sectors thereby leading to an increase in the rate of employment in the construction business. An increase in the demand for workers has further resulted in an increase in wage growth. Many construction companies are now considering adopting new construction technologies into their day-to-day activities. These companies have mainly focused on software tools for digital collaboration.
How Construction Businesses can best use different small business loans like Equipment Finance?
Equipment finance can help your construction business grow significantly by helping you acquire the latest high-end, construction equipment. By applying for a business loan, your construction business can acquire sufficient funding, which can enable you to purchase all the construction equipment you need.
Image Source: Unsplash
Some of the construction equipment that business loans for builders can help you purchase include; earth moving machinery such as loaders, excavators, trenchers, motor graders, backhoes and bulldozers, material handling equipment such as cranes, hoists, forklifts and conveyors and engineering vehicles such as trippers, dumpers, trailers, and tankers. Getting the suitable funding needed for construction equipment can help you preserve capital and manage your cash flow well.
Read the related blog: Plan your business cash flow the right way
Key factors to evaluate when looking for best small business loans for your construction business
Irrespective of the size of your construction business, there is often a massive need for financing and investment before you can actually start growing with new clients and securing more number of jobs sites at the same time.
In order to effectively scale operations, capital injection is very important for contractors and construction businesses which can be easily facilitated with the help of business loans. However, before securing a business loan, you need to properly evaluate the various options in front of you to truly understand whether a loan can properly fulfil all your requirements.
These are the key factors based on which you can decide on the business loan for your construction business.
Flexibility– Financing options that grants borrowers the flexibility based on their capital requirements is one of the key things to consider. Some loans are more flexible than others, but business owners might end up paying a premium for this flexibility. Hence, the flexibility of a loan and the costs involved for that need to be understood first.
Speed of funding– Traditional business loan lenders might involve a lot of formalities and bureaucracy, which tends to increase the time it actually takes to receive the funding despite having your loan approved. Hence, alternative lenders and business marketplaces offer quick access to capital, which can be easily and timely secured.
Qualification requirements– Business loans for contractors involve a wide range of qualification requirements. These are more so when it comes to approval from traditional lenders, who perceive the construction industry as largely unpredictable and volatile.
Re-payment terms– Most financing options available require weekly or monthly payments. Unless you are able to match the payment schedule with earnings from your business regularly, unnecessary interest charges and fines might get accrued on the borrowed amount, increasing complications gradually down the line.
Maximum loan amount– Certain financing needs, like staff hires, payroll, working capital, might require lesser loan amounts than other financing needs like renovations or equipment purchasing. Depending on the capital requirement, it is essential to evaluate whether the maximum loan amount is sufficient to finance your entire requirement or not.
Cost of borrowing– It is essential to calculate the overall cost of borrowing rather than simply focusing on the interest rate. Sometimes, lower interest rates and higher loan periods offer greater overall cost of borrowing, which contractors and business owners need to keep in mind. Moreover, other fees associated with borrowing capital also need to be kept in mind, like origination fees and closing costs.
How construction businesses can use unsecured business loans
Applying for unsecured business loans can help you grow your construction company by offering you the appropriate business financing you need for marketing, purchasing of stocks and hiring of staff. You are able to preserve your capital and maintain positive cash flow for your business while meeting the essential requirements of your business. You may need to market your construction business to grow your customer base. Typically, marketing requires adequate funding to be successful.
How construction businesses can use a loan against property
You can secure a business loan against a property to finance your business. Sometimes, you may be running out of cash or you need to preserve your capital. You can consider a loan to help you finance your construction project. However, in the case of a secured business loan, your prospective lender will need you to provide security, which can be in the form of property, invoices, rent roll, plant and equipment, specialized security or various cross-collateralized security options.
How construction businesses can use a business line of credit
You can use a business line of credit for a variety of purposes for your construction business including funding your suppliers, paying your employees, beating short-term cash flow gaps, countering sales slowdown, purchasing pricey equipment, bracing for unexpected expenses, and streamlining and tracking your business. You can use a business line of credit to fund your suppliers in the event your construction business is experiencing short-term cash flow gaps. Acquiring a business line of credit gives you the working capital to help you sustain your construction project smoothly while waiting to recoup your cash. A business line of credit also offers you adequate finance to cater to your employees’ salaries without having to wait for the expected business revenue.
📞 Get in touch with a Business Lending Specialist today!