While many banks claim to offer loans and lines of credit to construction industry businesses, it isn’t always easy to find one who works with construction companies. When you are planning on exploring different types of financing for your company, here are some of the things that you need to know.
Bank Loan and Line of Credit 101
Bank loans and lines of credit are two of the most popular ways that construction companies access financing. One survey of small business owners found that a whopping 85% of business owners have applied for or received a loan or line of credit.
Term loans are a particularly popular option for projects that will take a set period of time or for starting a business, as you will get a specific amount of funding for a set period of time. In contrast, a line of credit provides you with a maximum amount of funding, but you don’t need to use it or start repaying the balance immediately. Instead, you only pay interest on the amount that you borrow.
Are There Any Downsides?
One of the biggest downsides of applying for a loan or a line of credit with a traditional bank is the time involved. There is often extensive paperwork to complete, and you might not get a decision for weeks or months. This means that, if you need the money urgently, you might need to temporarily supplement with additional funding. Working with your accountant at MKS&H can ensure that you understand your cashflow and how much you need now.
There are other loan options that work outside of the traditional bank financing system, and one of the most popular types is SBA loans. These loans are given through the Small Business Administration, so they are backed by the federal government and not just a local bank. While they do not offer the same volume of funding as some banks, you can get fantastic low interest rates and versatile funding for your construction business.
Make Finances Easy at Your Construction Business with MKS&H
MKS&H provides tax and accounting services to businesses of every size and in every industry, including construction. We can work with you to improve your company and make sure that it is financially secure now and in the future. Contact us today for a consultation.
About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by putting complex financial data into truly meaningful context. But deeper than dollars and data, our focus is on developing an understanding of you, your culture, and your business goals. This approach enables our clients to achieve their greatest potential.