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Construction Business Loan: How to Qualify & Get a Line of Credit

Posted On: June 16, 2020 author Paul Kendall

Are you planning to get a construction business loan to hire more people for a big project or to buy a big piece of equipment like a crane?

Most construction businesses need to get additional funds every now and then. There are many reasons for this, but usually, it’s because they need heavy equipment for their business.

Most construction equipment is expensive, you see. Unless a construction company is huge and has a ton of spare working capital, buying new heavy equipment can lead to financial migraines. 

That’s where a construction business loan comes in. It’s a way to get the money a company needs to buy heavy construction equipment or working capital for payroll. 

Out of the many options for a construction business loan, the line of credit is probably most often used. That's because it's one of the easiest and fastest to use once it's available to you.

In this blog post, I’ll talk about this particular type of construction business loan and how you can apply for a loan. This will give you an idea of how you can easily qualify for one.

Getting a Line of Credit for a Construction Business

 

Aside from being easy to acquire and use, a construction business loan has various benefits. Among other things, it can boost your operations and cash flow.

How's that possible? Let's discuss the benefits of getting a line of credit for a construction business not involving invoice factoring of your business invoices. 

But of course, remember this when you go shopping for the best deal on a business line of credit:

  • You get the line of credit from a good online lender with decent terms.
  • You use the credit to actually improve your business.

 

 In any case, let’s take a look at the benefits of this type of construction business loan. After that, you’ll see how to qualify for one.

Benefits of a Business Line of Credit for a Construction Business

 

Knowing the benefits of a line of credit for a construction business will help you plan on how you’re going to use it. It will tell you how to use the construction business SBA loan.

So without further ado, here are the benefits that you can get from a business line of credit.

Construction-Business-Loan-How-to-Qualify-Get-a-Line-of-Credit

1. Flexibility

 

A business line of credit works like a credit card. When you get approved for this type of construction business loan, you will have access to funds at all times without having to wait.

Therefore, a business line of credit gives you flexibility when you’re using your loan to make payments for equipment. The same is true when you use it for other expenses for your construction business. 

You can even plan your budget fairly easily during the repayment period. Since the business line of credit gives you control, you may be able to set the amount and frequency of monthly payments to suit your circumstances.

2. Monthly Interest-Only Payments

 

It’s a known fact that construction businesses don’t get paid right away. This makes it a challenge for contractors to stretch their budget until they meet the next project milestone for payment.

With that said, contractors, especially the ones who run a small construction project, may not have enough working capital available to do monthly repayments for borrowed money.

Fortunately, most lenders of a business line of credit allow monthly interest-only payments. This means that contractors may only need to pay the interest rates on their debt every month.

What about the principal on the debt? You can pay the full amount of the business loan when the project is complete.

 

3. No Prepayment Penalties

 

With a line of credit, you may pay the equipment finance any time you want with no penalty at all. 

So, if you have available working capital and you wish to pay off only part of the business loan for now, you don’t have to worry about pre payment penalties.

That's one of the main reasons contractors choose to get business funding as their construction business loan. They have more flexibility to their payment terms than most other business loans.

How to Qualify For a Business Line of Credit

 

Now you know how for a construction business owner a loan like this can help your business. As long as you use the line of credit wisely, it should benefit your companies cash flow immensely.

But before you look for lenders, you should know first how to qualify for a business line of credit. This can help you secure the construction business loan quickly --  Now, there are a number of requirements you can usually expect lenders to stipulate if you’re seeking a line of credit. You'll only have to send in a single application and three months business bank statements.

Just like with equipment financing, getting a business line of credit through a lender like Trust Capital has the same few requirements. Let’s go over them.

Construction-Business-Loan-Get-a-Line-of-Credit


Decent Personal Credit

 

To qualify for a business line of credit for your construction business financing, you need to have good personal credit.

Particularly, you need to have at least a 620 credit score. Many lenders consider this number safe. It means that you are capable of handling your financial responsibilities. A 620 credit score is not hard to obtain. 

If you have a credit score above 650, you can get reasonable interest rates and even more affordable payment options. The higher your score, the better the terms!

Business History

 

Banks and lenders will look into how long you have been in the construction industry. Most of them will require a certain amount of time in the industry to qualify for a business line of credit. Most local banks will require you to have greater than 2 years in business but lenders like Trust Capital only require you to have been in business for 6 months to get a business line of credit. 

Annual Business Revenue

 

Your construction business must have at least $25,000 in monthly business revenue for the past three months to qualify for a business line of credit. 

Why, you ask? Because it assures lenders that you’re earning enough money to pay back the construction business loan in the future. You're going to be essentially getting an advance on your future receivables. 

Final Thoughts on Getting Construction Business Loans

 

In this blog post, we discussed getting a construction business loan using a business line of credit.

Getting a construction business loan like a line of credit for a business owner can be useful for a construction business. It can help you acquire new equipment, grow your operations, and more.

The line of credit is particularly attractive to construction business owners due to its benefits. It tends to be flexible in its repayments which is a short term and is easy to get.

To get a line of credit, you just need to have decent credit, been in business only 6 months, and sufficient annual business revenue.

That said, you shouldn’t just take the first line of credit you see. It’s best to get a construction business loan from reliable lenders who work with many other contracting businesses, like Trust Capital USA.

To know more about a construction business loan and lines of credit, leave a comment below or call (866) 458-4777.

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