HOW TO GET A LOAN FOR A CONSTRUCTION COMPANY?
If you are already determined to start your construction business, you must bear in mind that one of the most important aspects to start any company is to secure financial resources. Fortunately, there are many options for your idea to materialize. In this article, InQmatic presents you with several options so that you can get loans from practically scratch.
One of the most challenging aspects of starting any business is securing the financing to power it. Getting a loan for a business that wants to grow requires developing a good strategy because at this point your business does not yet have a business or commercial credit history, which makes it difficult to prove to equity funders that your construction business will be profitable enough to be able to repay the loan.
Fortunately, there are many options for you to start your construction business successfully. At InQmatic we offer you several alternatives so that you can start your company on the right foot.
Before coming to your options to opt for any financial resource, it is important to note that you need to have a business plan that details the objectives of your future company: for example, who will be your customers, the physical place where your business will be and when will it be? operate.
BANK LOAN
The first loan option is an installment loan, which is nothing more than a traditional bank loan, where you borrow an amount of money and pay it monthly along with the agreed interest.
In order for you to qualify for this type of installment loan, you need to have good personal credit, and you do not need to present any information about your business because it is a personal loan.
SBA LOAN TO START A BUSINESS
The SBA loan is a banking resource under the auspices of the Small Business Administration of the United States, known as SBA for its acronym in English.
SBA loans have the lowest interest rates of all business loan leads, which is why getting one is not so easy. They require a lot of documentation and very good personal credit, and this makes the application very lengthy and time-consuming.
MINORITY BUSINESS LOANS
To qualify for flexible loan programs, and get capital for your company, if it is classified as a minority (social groups or a community that, due to its population size, does not compare with the American majority, which is the majority), you must basically comply with the following profile:
Your business must be majority-owned by a member of a minority group.
Your business must be registered or certified as a Minority Business or Disadvantaged Business Enterprise (MBE / DBE).
You must belong to one of these minority groups: women, African Americans, Asian Americans, American Indians, Hispanics, Latinos, or Pacific Islanders.
Your business must generate less than $ 1 million in annual sales.
Your business must have reported at least 2 years of positive net income on your tax returns.
You are starting a business or have been operating for at least 3 years to form your business.
If you qualify as a minority here are some of your loan options:
COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS (CDFI)
CDFIs (Community Development Financial Institutions) are non-profit financial institutions that seek to provide loans to communities that traditionally do not have access to banking services. Many large banks indirectly finance minority business owners by financing their (CDFIs) partners and referring them to bank clients.
They offer personalized assistance in conjunction with the loan they give you, which helps you prepare for a bank loan in the future. They also offer very good low-interest rates and extensive coverage in the US to keep helping you.
Now, the application process can take a long time, and if you need a larger loan amount it may not be enough to fill out just one application, because as with a large bank loan, you may need to present an endorsement (someone who financially back as a guarantee that you can repay the loan).
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COMMUNITY BANKS
Community banks are often a great option for minority businesses, as they are more accessible than large banks, and they focus on serving more community members than large clients with national coverage. They provide personalized customer service and competitive rates for your small business.
Customer service is fast so you can get your loan more easily. They will be interested in your story and will take it into account when you apply for the loan. Also, since many banks are SBA certified lenders, their interest rates and loan terms are as good as a large bank.
Community banks have less technology than large banks, which requires several visits to your branch to do paperwork and sign your loan documents.
ACTION USA
This financing option ranges from $ 200 to $ 300,000 and is available in all 50 US states for low to moderate-income business owners. In addition to minority-owned businesses, ACCIÓN supports women, veterans, restaurant owners, and people with disabilities.
It is a non-profit entity that supports the community through its entrepreneurs so that they can start their businesses from scratch. The organization connects business owners with banks, other non-profit organizations, and government agencies, thus providing a network of support.
One of the requirements of this loan is that you cannot be more than 30 days late in paying your bills, other loans, or credit cards. Applicants must have a minimum credit score of 575, as well as not have had to pay a mortgage or rent in the last 12 months.
BUSINESS CENTER FOR NEW AMERICANS
These loans are made to minority business owners in the United States in amounts ranging from $ 5,000 to $ 50,000. BCNA (Business Center for New Americans) offers these loans to entrepreneurs, refugees, women, and immigrants. The organization helps business owners who have been turned down by other lenders due to low credit scores, too small loan applications, or starting businesses.
They charge fixed interest rates between 8.25 and 10 percent, low application fees, and a 2 percent loan closing fee.
One of its disadvantages is that you require a consignee for loans over $ 3,000. Borrowers must match 20 percent of the loan amount.
GOVERNMENT HELP TO START A BUSINESS
You can use the resources of federal government agencies on training opportunities, financing, tax benefits, and how to avoid fraud, among others.
THE FEDERAL AGENCY FOR SMALL BUSINESS DEVELOPMENT
The Federal Agency for Small Business Development (SBA) can help you with planning your construction business and the programs you have to start your business.
The SBA provides you with various resources to develop a business plan that is tailored to your needs. Among these, you can find:
Advisory tool. This resource has a questionnaire to determine your level of training, needs, and teaches you business strategy.
Free business courses. In conjunction with other nonprofits, the SBA offers free online courses that cover topics relevant to new entrepreneurs; for example, business and marketing plans, business organization, accounting, taxes, and much more.
Development centers. The Business Development Centers (SBDC) Program offers assistance in all stages of planning a business. There are centers in every state in the country that focus on local markets and the needs of each client.
THE FEDERAL TRADE COMMISSION
The Federal Trade Commission (FTC) has basic information about starting a business.
The FTC has resources that allow you, among other things, to see how to start an online business, how to buy a franchise, learn about marketing strategies and plans that fit the needs of your company, as well as identify job offers fraudulent.
THE INTERNAL REVENUE SERVICE (IRS)
The Internal Revenue Service ( IRS ) has useful information on the steps to take to start a business and know how to make decisions before starting a business. You can consult tax tips, types of taxes, and accounting methods.
RESOURCES FOR SOLE PROPRIETORS
Being a sole proprietor means that you are the sole owner of the business, and it teaches you about all your benefits and obligations. This is the simplest and most common structure for starting a business.
On the SBA page, you will also find resources to start your business, pay your taxes and you will be able to find out about the advantages and disadvantages of this business model. Once you have decided on the financial resource option that best suits you to start your construction company, in InQmatic we can advise you with our specialists, who will make the process or management a pleasant, fast, and simple experience. We invite you to consult our platform
you may read also 7 Ways to Finance Your Construction Business