A construction business will need to be supported with a business loan from time to time to keep the operations running or for expansion purposes. If you are in need of a loan, you need to have the attributes that will help you get one easily. In this article, I will aid you in knowing how to qualify for a business loan for your construction business.
Work on your Personal as well as Business Credit scores
Personal credit scores, as well as your construction business scores, will determine your creditworthiness. They are couple of factors which are considered while calculating the scores; the nature of your payment history, the amount of cash owed on credit cards as well the debts that you might have, the amount of time you have had credit and the type of credit that you use and any of the latest inquiries on credit that you have made. The Personal credit scores could range from 300 to 800 but they could be higher than this. Credit scores are used to predict your ability to pay debts.
Ensuring that you pay your credit in a timely manner will enable you to be a suitable candidate for an extra loan. It is good to check your credit rating from the various business bureaus and see to it that these figures are accurate.
Familiarize yourself with the lender’s minimum requirements for a Loan
It will prudent for you to know the minimum requirements that the lender you are approaching requires. Though some will pardon you for underperforming in some areas while at the same time excelling in other aspects, it will be best if you over perform in most of the aspects that they are on the lookout for.
Most of the lenders will be interested in your credit scores, the annual revenue of your construction company and the period that you have been in the industry. A bad credit score or a history of default in the payment of your previous loans will discourage some lenders. The online lenders tend to be more lenient but it is generally advisable that you know the specific requirements of each lender.
Have the relevant documents in place
Some of the documents that you may be required to present for you to qualify for a business loan for your construction company include:
- A balance sheet and income statement of your company
- Your personal as well as business income tax returns
- The articles of incorporation
- Your construction company licenses
- Any commercial leases
- A resume that details the management or your experience in the construction industry
- Any Financial projection of your company
The traditional lenders are the ones who demand that you provide most of these and it might be time-consuming. If you are in need of urgent cash you can try out the online lenders who have fewer requirements and they act relatively promptly.
Have a Convincing Business Plan in Place
In order to win your lenders over, it will be prudent to have an elaborate and realistic business plan. This will increase their confidence in you and they will be more hopeful that you will pay up your loan. Define your business, provide your financial projections, your marketing plans and last but not least the SWOT analysis of your construction company.
Ensure that you have Collateral for the traditional lenders
Banks are usually the sources that will ask for collateral before your loan is approved. This is meant to act as a cushion in case you default or are unable to pay up the loan and the accrued interest. It could be an asset, your real estate property or any other relevant item. Most of the recent online lenders rarely require you to provide collateral though they might make use of liens.
All in all, before you apply for a loan to boost your company you need to familiarize yourself with some of the qualities that will enable you to qualify for one. Having a good credit history, having an elaborate business plan and the provision of collateral will increase your chances of getting a business loan. This is how to qualify for a business loan for your construction business.