Contractor Business Loans
Competitive Rate Financing for Construction Companies, Contractors, and Skilled Specialists.
How Do You Qualify for Term Loans?
1+ Year in Business
Assets or Collateral
What Are Contractor Business Loans?
Types of Contractor Business Loans
The contractor loan market offers significant variation, with each loan type having its own set of advantages and disadvantages. Here are the main types of loans contractors can utilize:
Short-Term Loans
Ideal for contractors needing a quick cash boost, short-term loans offer a convenient solution for immediate financial requirements. Despite higher interest rates, these loans are appealing due to their ease of access and minimal paperwork requirements.
Long-Term Loans
For contractors looking to make significant expansions or large-scale purchases, long-term loans provide the opportunity to secure larger amounts of funding at more favorable interest rates. These loans offer a longer repayment period but typically involve collateral and a more thorough approval process.
Lines of Credit
Business lines of credit offer maximum flexibility, allowing contractors to draw funds as needed and pay interest only on the amount used. This option is ideal for managing fluctuating cash flow needs, though it may come with fees and requires a solid credit history for approval.
Revenue-Based Financing
Catering to businesses with steady revenue streams, this option allows contractors to access capital based on their monthly or annual revenue. Repayment is usually calculated as a percentage of the business’s revenue, providing flexibility as it aligns with the company’s income levels. This can be especially beneficial for contractors with fluctuating project timelines and payment schedules.
Equipment Financing
Specifically intended for buying equipment, this type of loan offers lower interest rates and directly increases the business’s operational capacity by using the purchased equipment as collateral.
Invoice Financing
Invoice financing allows contractors facing payment delays to receive an advance on their unpaid invoices, improving cash flow without waiting for client payments. Although fees can impact total revenue, this option is crucial for effectively handling short-term liquidity needs.
National Business Capital Advantage
National Business Capital’s longstanding lender relationships work in contractors’ favor. Our Business Finance Advisors negotiate on behalf of your business to achieve specialized structures and contract exceptions that allow you to grow your business to greatness with minimal friction.
How Do Contractor Business Loans Work?
The process of securing a contractor loan begins with the application, where contractors must provide comprehensive details about their business. This information allows lenders to assess the borrower’s creditworthiness, the business’s financial stability, and the feasibility of the business plan.
Required Documents
Contractors may need to provide the following documents:
- Financial Statements: Balance sheets, income statements, cash flow statements, etc.
- Credit Score and History Reports
- Business Plan
- Tax Returns
- Bank Statements
- Collateral Documentation
- Business Legal Documents: Licenses, permits, articles of incorporation, commercial leases, franchise agreements, etc.
- Debt Schedule
- Proof of Ownership
- Insurance Information
- Projections and Forecasts
Approval and Contract Negotiation
Once the application is submitted, lenders review the provided documents to determine eligibility. If approved, businesses enter the contract negotiation phase, where they work with their lender to refine the offered terms. Over-qualified businesses typically have stronger negotiating power compared to those that barely meet minimum requirements.
Both parties must agree on a contract for the transaction to proceed. It’s important not to feel pressured into accepting an offer that doesn’t meet your business needs. Once an agreement is reached, the contract is finalized, funds are disbursed, and the repayment process begins.
Repayment Terms
Repayment terms vary significantly depending on the type of loan. For example:
- Short-Term Loans: Repayment periods can be as short as 90 days.
- Long-Term Loans: Repayment periods can extend up to 10 years.
The repayment schedule could be daily, weekly, or monthly, typically determined by the business’s cash flow and the specific loan product. Some lenders offer unique repayment cycles, granted on an as-needed basis to qualified borrowers.
By understanding the application process, necessary documentation, and repayment terms, contractors can better prepare for securing and managing their business loans effectively.
What’s the Difference Between Contractor Business Loans and Traditional Financing?
The term “traditional financing” refers to more generic loan options such as home mortgages, personal loans, and general business loans, while contractor business loans are specifically tailored to meet the unique needs of contractor businesses. These specialized options are designed to address challenges like handling delayed payments from clients, financing specific equipment purchases, or covering operational costs during off-seasons. The loan structures, terms, and eligibility requirements are crafted to accommodate the cyclical nature of construction work.
Key Differences
Eligibility Criteria
- Contractor Loans: Typically more accessible to contractors who may not have perfect credit scores but have proven cash flows or strong receivables. Lenders consider unique aspects of the contractor’s business model, including predictability of future earnings based on signed contracts.
- Traditional Financing: Requires stronger credit scores and a longer history of profitability. Lenders assess risk based on rigid criteria that might not consider the seasonal or project-based nature of a contractor’s work.
Application Process
- Contractor Loans: The process is streamlined to accommodate the fast-paced nature of construction projects. Lenders specializing in this industry understand the challenges contractors face and may require non-traditional forms of proof of profitability, such as upcoming project contracts instead of past income statements.
- Traditional Financing: Involves a more comprehensive and time-consuming review process, including detailed scrutiny of financial statements, tax returns, and other documents proving the business’s long-term viability.
Use of Funds
- Contractor Loans: Specifically tailored to support project-specific requirements like purchasing equipment, hiring labor, or procuring materials ahead of project payments. These funds align with the project-driven financial cycles of a contractor’s business.
- Traditional Financing: Funds can be applied to a wider range of projects, such as marketing, organizational infrastructure strengthening, and expansion. These loans are not designed to meet immediate or short-term financing needs of specific projects.
Repayment Terms
- Contractor Loans: Repayment terms are often aligned with the contractor’s cash flow, which may not be consistent year-round. This could include seasonal repayment schedules or balloon payments coinciding with a project’s completion.
- Traditional Financing: Usually involves rigid repayment structures with regular monthly payments, regardless of the business’s seasonal variations. This can be challenging for contractors who experience gaps in their cash flow.
By understanding these differences, contractors can better choose financing options that align with their business needs and operational cycles, ensuring they have the necessary funds to support their projects and growth effectively.
How to Apply for a Contractor Business Loan with National Business Capital
Apply Securely Within Minutes
Move through our streamlined application and securely upload your business documents. After submitting your application, a Business Finance Advisor will reach out shortly to learn more about you, your business, and your unique circumstances.Review Your Offers
Your Business Finance Advisor will identify the lenders most likely to provide you with a competitive offer. You’ll work with our team to prepare your applications in a way that positions your business for the best possible offers. Then, you’ll compare your offers with expert advice and select the best one for your specific circumstances.Receive Your Money
With a contract finalized, you’ll receive your funds and be able to use them promptly. We’re your Debt Advisory Group. Click “Apply Now” below to unlock the offers your business qualifies for.Lowest Rates, Longest Terms, & Highest Amounts
Funding Amount
Up to $100MM
Repayment
Up to 25 years
Time to Fund
1 to 7 days
Types of Term Loans
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Short-Term Loans
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Short-term loans have expedited repayment periods between 6 and 18 months. These are best for situations where you’ll see a near-immediate ROI from your financing, like purchasing the upfront costs needed for a project or picking up bulk inventory for a holiday season.
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Intermediate-Term Loans
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Intermediate repayment falls between 1 to 3 years. It’s essentially a middle ground for entrepreneurs who don’t need short or long-term financing.
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Long-Term Loans
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Entrepreneurs select longer repayment periods to lower their monthly payments and spread out the borrowed amount for as long as possible. Although you’ll pay more in interest payments, opting for longer repayment periods is a way to preserve your cash flow.
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Discover the Industries That Benefit From Term Loans & Financing
Frequently Asked Questions
A term loan is a specific amount of money lent to a borrower by a lender, with repayment scheduled over a predetermined period. The loan begins with a start date when the funds are deposited into the borrower’s business bank account, and it concludes on an end date once all principal and interest have been paid off.
Borrowers may have the option to repay the loan before the term ends, potentially lowering their overall cost of capital, depending on the lender’s terms. Term loans are commonly used for various business purposes such as inventory purchases, business expansions, renovations, working capital, and more.
There’s essentially no difference: Term loans are a type of financing where the borrower makes regular payments toward the principal and interest over a specified period.
Other types of financing, like revenue-based financing, offer a lump sum of capital similar to term loans. However, they typically feature shorter repayment periods and approval criteria based on profitability rather than traditional credit metrics.
All term loans have the following characteristics in common:
- Lump sum payment
- Consistent repayment schedule
- Established start and end dates
- No equity transactions
- Potential to save on the cost of capital with early repayment
- Late payments/defaults damage your business’s creditworthiness and credibility with the lender
If you’re looking for a straightforward financing method, you should explore term lending and the options available to you.