There are thousands of competitors in the construction industry for the same market share. There is a lot to do, but you will need to make sure you are always operating at your best.

Cash flow problems can hinder your ability to complete work on time or even worse, could disqualify you from a contract, halting your growth. You need to resolve the liquidity problem immediately, regardless of whether it is due to a late-paying client, or another cause.

While you might have cash reserves that you can access, taking out your emergency fund will leave you less prepared for unexpected downturns and unforeseen expenses. There are many capital options available to you as you build your business’ success, including term loans, business credit lines, and equipment financing. Each option comes with its own advantages and disadvantages. So how can you decide which one is best for your particular situation?

It is essential to fully understand the options available. Let’s look at the top five financing options for construction companies in 2023, and how to get terms that suit your business and not your budget.

Financing Options For Construction Businesses

Construction companies can use almost any type of financing, except for specialized programs like farmer loansspan styling=”font-weight 400 ;”>. Here is a list of the most popular construction financing options.

Business Line of Credit

Although business lines of credit can be beneficial in any industry, they are especially useful for entrepreneurs in the construction sector. It’s basically an open credit line that you can access as needed, up to a limit. You can borrow the funds again once you have repaid the loan amount. This will allow you to be ready for any challenges or expenses you face.

This is one the most flexible options for entrepreneurs. The interest you pay is only on the amount that you draw. You don’t have to talk to your lender every time your line is used for business expenses. Some lenders may charge fees or impose stipulations that could limit the utility of your financing. Before you sign on the dotted lines, ensure that you carefully read your contract.

Equipment Financing

Excavators can cost anywhere from $100,000 to $500,000. Construction equipment is costly. Excavators can cost anywhere from $100,000 to $500,000.

Construction companies can use equipment financing to help them break down a large purchase of expensive equipment into manageable steps. The lender pays for the equipment that you are looking to buy, and you pay the lender the amount on a schedule with interest. After you have paid off the principal and the interest, the asset will be yours and you can use it however you like.

SBA Loans

SBA loans have favorable terms and low interest rates, but strict eligibility requirements. SBA loans are partly backed by government. This means that the government will pay a portion of the loan if the borrower defaults. Lenders will be more likely to offer them lower interest rates, better terms and greater funding amounts due to the additional layer of security.

SBA loans come as many sizes and shapes. Microloans and 7(a) loans are the three main programs. 504 loans is another option. The smallest loan program, microloans, can be funded up to $50,000. Both 504 and 7(a loans offer funding amounts up to $5million, but 504 loans can only be used for major fixed assets that support business growth and job creation.

SBA loan interest rate starts at the Federal Reserve’s Prime Ratespan styling=”font-weight 400 ;”>,, but this number can change based on FED’s actions. Click here to find out more about SBA Loan Rates.

Term Loans

Term loans are the most basic type of business loan. They are a one-time lump-sum payment that you will repay over the agreed-upon term. Although you may be required to provide collateral in order to “secure” financing, there are many ways around this, particularly if your credit score is high and your annual income is substantial.

A detailed business plan detailing how you will use the funds may be required by any lender you work with. Even if the lender doesn’t ask for it, it’s a smart idea to have one so that you fully understand how your money will be used to grow your business.