Financing options in the Construction Industry

There are tens of thousands of construction companies in the United States. In fact, the construction industry, in particular small businesses in the construction sector are responsible for employing more non-college educated men than any other industry.

If you are looking to learn a skill and make a good living without having the debt that accompanies a four year degree, construction is one of the few industries that I really believe you should look into. You may also want to look into home services that are adjacent to construction such as plumbing.

One of the major downsides of running a construction business is finding options to finance that business. Because these companies are often asked to deliver a completed product before getting paid, cash flow can be a problem.

Fortunately, there are a handful of options such as asset based lending, bank revolvers and A/R financing for construction companies that are large enough to qualify. Construction blog has a handful of articles on this topic that I would recommend thumbing through.

For those owners or business executive in the construction or manufacturing industries that are looking to raise capital or sell thier business, Minerva Equity may be able to make you an offer. You can also read more into the options available to you when you are looking to sell a construction business.

Here is some beautiful architecture in Madrid, Spain

Loans for construction companies can be from banks or private lending institutions. The benefits of using your bank are that it will generally come with a lower interest rate. In addition, you will likely be able to build up a relationship with your bank and use a basket of their services. The more comfortable you get with them and the more comfortable they get with you and your company, the better terms you will likely be able to negotiate.

If you are looking for fast cash to service your debts or float you until the project is over, this article will be of benefit to you if you are looking for a construction loan.

Debt or Equity in the Construction industry

  • Depending on the size and life stage of your construction business, there may be a handful of options available to you when seeking capital.

For start-up stage businesses, they will likely get a bank loan. Banks are typically not in the business of taking equity in businesses, so they’ll end up giving you a loan that you may have to personally secure. This means that you’ll have to pledge your personal assets as collateral until you pay the bank back with interest.

If you are able to find a small business investor, you may be able to finance your business with an equity investment. This means you will have a partner (silent or otherwise) in running your business.

A great example of this happens to be my friend Ryan’s business. Ryan runs Colorado Remodels, which, as it sounds, is a remodel company in Colorado (he lives just outside of Denver). I partnered with him in running his business and took a portion of the equity. We decided to do this because we:

  • Already knew each other
  • Had built trust
  • Had complimentary skill sets

Because he is great at providing the remodeling services and I have had success with branding and marketing, we have had a successful partnership. Maybe you can do the same for your business?