It’s no surprise that small business entrepreneurs want to capitalize on the recent construction market surge. In fact, analysts expect this field to continue to grow over the next several years.1 A recent shift to more sustainable practices and green construction is also driving this change.
However, the construction industry has a unique set of challenges. Owners face heavy regulations, steep insurance rates, and countless licensing and permit requirements. Furthermore, recent price increases in raw materials and tariffs affect supplies like steel piping, aluminum, and asphalt mixtures, which also contribute to the industry’s high operating costs. Rising fuel and labor prices add to the complexity of operating a small construction business.2
As a result, many small construction business owners experience cash flow issues that prevent them from paying invoices on time, purchasing materials, or even compensating their employees. Extreme cases can also cause a construction business to fail.
You can avoid a cash flow issue using accessible capital with options like a business line of credit or SBA loan. Lines of credit are quick loans for small business owners to cover expenses such as cash flow shortages, day-to-day expenses, and even larger purchases. Like a credit card, a business line of credit offers flexibility; you can use the funds whenever you need them without having to reapply. It is a revolving loan, which means that you can spend up to your credit limit and only pay interest on the amount that you borrow.
An SBA loan is another financing option with traditionally low rates because the US Small Business Administration acts as a guarantor. However, SBA loans are issued for specific purposes like commercial real estate. These may be more difficult to secure due to stricter business credit and other eligibility requirements.
Some of the most successful small business owners use various types of business financing to expand their enterprises. Using credit effectively can give you the financial freedom you need to secure longer-term investments and future projects while also funding your everyday expenses. While there are many different options for small business owners, some lenders can deposit money into your account the very next day so you won’t miss a beat while running your business.
If funding is the difference between taking on your next project or turning it down, evaluate your choices carefully. It’s tempting to try to weather the storm on your own in a financial shortfall, but you have options to run a successful enterprise.
1Beesley, C. (December 29, 2017). How to start a small construction or general contracting business. Retrieved February 7, 2019, from https://www.sba.gov/blogs/how-start-small-construction-or-general-contracting-business
2The Associated General Contractors of America, Inc. (October 10, 2018). Construction material costs increase 7.4 percent, as contractors continue to be squeezed by tariffs and rising fuel prices. Retrieved from https://www.agc.org/news/2018/10/10/construction-material-costs-increase-74-percent-contractors-continue-be-squeezed
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