4 Benefits Of Working Capital Loans For Construction Companies

Ezra Cabrera

Updated: October 16, 2018
How to get a working capital loan in detroit

Sufficient working capital, defined as the difference between your current assets and liabilities, is essential for construction companies due to the cyclical and seasonal nature of the work. Construction companies allocate money for labor and materials before the completion of a project. Most contractors bill their clients on 30-60 day terms. This can cause money to be delayed, anywhere from 45-90 days. A gap in cash flow can result in a decreased credit score, delayed projects, and decreased opportunities.

Additional working capital allows your business to take on more projects and not worry about being short on payroll or other responsibilities. This is a strategy that helps businesses grow and acquire a greater market share. Working capital loans provide the flexibility and cash on demand to protect your reputation and ensure you’re ready for upturns in business production. There are several benefits associated with working capital loans that make them an ideal program for many construction businesses.

Working Capital Loans don’t demand any fees to be paid upfront

Additionally, you often don’t even need to have collateral. Collateral is an asset offered to secure the loan. If you default on the loan, the lender uses the collateral to offset their loss. This helps lenders reduce their overall risk. With working capital loans, terms and conditions will be granted based on the current cash flow in the business. If the cash flow can support the loan, the underwriting team will feel comfortable establishing the relationship and move forward.

Working Capital can be the bridge when things get tight

You know the construction industry is anything but predictable. There are many factors, that play a role and can lead to short term issues that put stress on the business. Whenever this happens, alternative lending options can help you get through these “rough” times. Whether it’s for emergencies such as a health issue, unexpected weather delays, or for extra labor and materials to bring projects up to speed, these loan programs help you effectively manage unexpected speed-bumps.

There are loan programs with repayment terms that make sense for the business

One of the factors that might make a business owner hesitant about working with an alternative lender, is the uncertainty of the payments and where this will leave their business. Consider this. Lending companies don’t want you to default on the loans they provide you. So, it’s in their best interest to truly gain a thorough understanding of your business and offer you terms that are win-win. Sure, they might have slightly higher interest rates than a traditional bank, but there are also other benefits that make it a better option for you.

The time it takes for an application to be filled out until the time a business owner is funded, is generally 24-48 hours.

The application process is simple

Applying for a business loan from SMB Compass is very simple. After you complete your application, we get in touch to discuss your specific needs, learn more about you and your business, and construct a workable plan for you. Once you are approved, the funds make their way to your account faster than traditional loans as well.

Both new and long-standing construction business owners need a partner that can provide financial benefits and support in the current market. If you operate a construction company, it’s important to start identifying alternative business lending options sooner rather than later. When you start your research and application process at an early stage, it allows your business to apply for working capital while your bank statements and credit profile are strong. This will result in lower interest rates and better terms.


Ezra Cabrera
Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.

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