When the contractors are into the construction business, it is rather a difficult task to get proper finance. To fulfill the demands of their clients the project needs to be completed quickly. The investment has to be done on the next project before you get paid for earlier projects. The finance dilemma is to be handled effectively so that the entire construction task is streamlined.
Capital Fund 1 assists with different construction projects. It is a private money lender for construction and land loans in Arizona. The contractors, developers, and investors must have awareness about the Capital Fund I’s construction financing program so that they can use it for their benefit in terms of finance.
Financing Options for Construction Contractors
These loans are given for a short duration. These provide the funding for the construction or renovation of a property. The down payment of the loans is from 20% to 25 % of the total project cost. It is a big amount. The funding is given in installments.
The lender visits the sites and does the inspections. The interest rates for the construction loans are low than the banks provide. However, they are far more reasonable than given by private lenders.
Small Business Association Loan
These are also called as SBA loan. The loans are guaranteed by the government and can be utilized by qualified construction companies. You can apply for the Small Business Association loan through an affiliate lender and make use of the funding for your project completion. The term for clearing the loan is between 5 to 10 years.
Contractor Line of Credit
This loan can be applied at a bank or via a private lender. You need to pay interest for that amount which you use. The moneylender takes into account your paying capacity, once it is approved you get the loan.
The main benefit is you need to pay interest only for that amount, which you use like buying the materials for the construction work. If no money is spent you do not have to pay the interest.
This type of loan can be availed for purchasing heavy machinery or equipment like tractors etc. Firstly, you have to find the vendor from whom you will buy the equipment, after this, you need to apply for financing needed in buying the same through the lender.
Purchase the equipment and pay within a period of 2 to 7 years. The interest loans are less as compared to other construction loans.
Invoice Financing / Invoice Factoring
These two types involve getting the advance payment from the lender to pay the amount to your clients. In invoice financing, the unpaid invoices are used as proof to avail loan. You get some amount of total value of the unpaid invoices from your lender. You can pay the amount back when your invoices are paid.
In invoice factoring your unpaid invoices are sold to the lender. You receive a partial advanced payment from the lender. The lender is allowed to collect the payment from your clients. You get the remaining payment from the lender, excluding the fees charged by him for the services given.
The construction contractors can handle the financial crisis when they avail of the different types of loans available for the completion of the projects. The delays are avoided and the construction work can be finished on time.