4 Must-Haves When Securing Construction Financing

Growing a successful construction business involves money; it would be impossible to make decisions without it. However, not many small businesses are qualified to take out loans, especially when you haven't been in business for too long or when you don't have a good business credit rating. 
If you’re currently eyeing to secure more capital this year, there are ways you can get financing. With the right financing, you can expand your business, hire new employees, purchase new equipment, and more.  
Here, we will outline all the must-haves when borrowing money from lenders. 
1. You must have comprehensive business plan 
When applying for a business loan, one of the first things you'll need is a business plan. A business plan is a document that outlines your business goals, strategies, and how you plan on achieving them. 
Having a business plan is essential because it shows lenders that you're serious about your business and have a clear idea of how you can generate more income. 
2. You must maintain a good personal credit rating 
With the absence of a business credit score, lenders will look at your personal credit to assess your behaviour when repaying bills and debts.  
Personal credit scores are a good indicator of how likely you are to repay a loan. If you have a high credit score, it means that you have a history of making on-time payments and using credit responsibly. On the other hand, if you have a low credit score, it could mean that you're more likely to default on a loan or make late payments.
Having a good personal credit score is important because it shows lenders that you're a responsible borrower and are likely to repay your loan on time. If you don't have a strong credit score, you may still be able to get financing, but it will likely come with a higher interest rate. Otherwise, you will have to put up collateral. 
3. You must prepare collateral 
Since lending to small businesses in general is risky for lenders, most of them will require you to put up collateral to ease that risk. 
Collateral is important when applying for a small business loan because it provides the lender with security in case the borrower defaults on the loan. The collateral can be in the form of property, equipment, or inventory. 
Collateral can give the lender some peace of mind when you're applying for a business loan. They know that they can sell the collateral to recoup their losses if you can't repay the loan. Collateral also gives them a chance to get their money back should your business go under. 
4. You must show your business cash flow 
When you're running a small construction business, you know that cash is king. Every dime you have must be appropriately used and thoughtfully spent. If you have been mismanaging your finances, lenders will know about it through your cash flow statement. 
A cash flow statement shows how much money is coming in and out of your business. It provides insight into your company's financial health, and can help your lender determine whether you’ve been managing your finances well. 
Lenders will want to see proof of your cash flow before approving your loan. They want to know that you have enough money to cover the loan payments. Your loan application will likely be denied if you don't have good cash flow. 

The Bottom Line 

Financing the growth of your construction and renovation business is crucial if you want to keep it running long-term. If you need assistance in finding the best loan for your business, it’s always best to talk to finance experts. They will guide you through the best loan options that fit your needs. 
About the Author: Founder 
Matthew Gillman, Business Financing Expert with more than a decade of experience in commercial lending. He is the founder and CEO of SMB Compass, a specialty finance company providing education and financing options for business owners.  

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