Seeking cash advance for construction companies is imperative for a variety of reasons. But not many have an idea of what type of cash advances are available on the market or what exactly their requirements are and how much they need to borrow. There are many reasons why construction companies would want cash advance loans and could include;
- Lack of adequate working capital
- Making payments for the purchase of the real estate
- Renovating or developing the premises leased
- Purchasing stock required for construction
- To exploit the current market conditions by making investments
- Purchasing equipment and tools for construction
When most of the construction companies think of cash advances, they immediately turn to either banks or commercial institutions for loans. In fact, there is nothing wrong in thinking about acquiring traditional bank loans as they are less expensive and give you ample time to repay. However, the bank loans suffer from many disadvantages over the advantage of being less expensive. Acquiring a bank loan is tedious and getting the loan approved is a challenging task. The banks are much stricter when it comes to approval criteria of business loans and is not easy for many especially constructions companies and contractors to meet their criteria. The top three requirements to qualify for a bank loan are assets to secure the loan; business should be an established one with acceptable credit score. And above all convincing, the bank on your ability to repay is the most difficult part.
Businesses with less than average credit scores cannot qualify for bank loans and therefore need to rely on other finance options. If you are in the construction business and are looking for various options of cash advance apart from traditional bank loans then, fortunately, there are few sources to avail loans. The alternative finance options that you can consider are provided and discussed below.
Microloans are small loans of 35k or below that are advanced for new or start-up businesses. These loans are advanced to non-bank lenders by SBA, and these lenders lend the same to the eligible borrowers. Lenders differ in their requirements on the advances, and there are better chances for you to acquire this loan if you have a microlender in your area.
SBA loans are given by the SBA contrary to popular belief, but are funded by conventional commercial banks and are guaranteed by SBA. This means loans secured by the SBA if a default by the borrower, a part of the loan will be covered by the SBA to decrease the risk of lending to the banks that has advanced funds to the borrower.
Factoring makes the best option if the business is in need of some working capital urgently. The bills receivable of the company are discounted with the lender to receive the cash advance immediately. Later lender collects the bills directly from the creditors when they are due.
Merchant cash advance
A merchant cash advance is ideal cash advance for construction companies with bad credit or those that do not possess any asset to pledge. The merchant cash lender advances lump sum cash to the borrower based on sales activity of the company. The borrowing company should deal sales with a card machine and should have a merchant account.
With the above cash advance options available for construction companies, it is advisable for businesses to borrow the loan required by having proper knowledge as to how different cash advance loans work along with their terms and conditions.