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General Contractor Loans: The Best Financing Options for Your Construction Company


by Oscar Davis • 2020-03-11



There is an abundance of information online regarding construction loan programs. However, most of this information is in reference to personal construction loans for the purpose of building a house. But what about contractors?



This article is going to take an in-depth look at the various general contractor loans available in the United States. In addition, we will point you in the right direction to some lenders that can meet your financial needs and help you the most.



General Contractor Bank Loans

The first option general contractors should look at is traditional bank term loans or line-of-credit. The rates for these general contractor loans will range from 5 - 10% with terms from 1 to 25 years. However, traditional bank loans can be tough to secure. However, do not let this discourage you, there are many more options available to help your business secure general contractor loans!



SBA General Contractor Loans

The Small Business Administration offers general contractor loans to construction firms when traditional bank loans are not an option. This type of loan is easier for general contractors because the SBA agrees to cover a large percentage of the lenders losses should the contractor default. This type of loan has rates from 6 - 8% with terms from 3 to 25 years.The SBA provides some of the best business loans for contractors.



504 Loan Program

The 504 loan program requires two steps to secure general contractor loans. As stated in The SBA Loan Book, by Charles H. Green, usually the lender that has committed to funding the senior mortgage loan will provide construction financing. Green also notes that the lenders credit policy may have other requirements for the construction loan, such as additional collateral to be pledged during the construction period. Regardless, this is definitely a great program if you are looking to secure general contractor loans.



Alternative Business Loans for Contractors

Alternative general contractor loans are another great option if the options mentioned above are not possible. Alternative business loans for contractors can be much easier to obtain and can be funded very quickly. Rates for this option can range from 8% to 25% with terms from 1 to 5 years.



USDA Construction Loan

The United States Department of Agriculture provides a variety of construction loans. While they may not provide general contractors with direct business financing, they can still assist your business! USDA loans are primarily for the construction of new homes. However, if you are a general contractor, you should become approved to be a USDA loan homebuilder. Many USDA lenders require prior approval of general contractors before approving a loan. If you become pre-approved, this means more business opportunities.



Asset Based General Contractor Loans

Asset Based business loans for contractors can be great if you have a lot of assets or equity to put down as collateral. As mentioned by Gudcapital, asset based lenders may give borrowers 1st-3rd position on the real estate and can provide up to 50% of the real estates value for funding. Rates for this option may range from 10-20% and can have terms from 1 to 5 years.



General Contractor Cash Advance Loans

Cash Advance loans for general contractors is a very common option. While they are not true business loans, they are still a very viable options for many construction contracting companies. Terms for this type of financing can range from 3 to 24 months.



If you are working in the construction industry or running a general contracting company then you are in luck! There are many options to choose from when it comes to obtaining general contractor loans. You are very likely to get your business funded one way or another, so keep searching for the right option for you and keep pushing forward!



We are providing a list below with some good lenders and resources that can help fund your business.



OnDeck


Billd


Kabbage



Business Funding

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