5 Ways That Your Construction Business Can Utilize Short-Term Working Capital
When it comes to running your construction business it’s important to ensure that you always have the capital on hand to keep operations running smoothly while not disrupting your established timeline, but this can be a challenge especially when large upfront costs eat away at your working capital. What is the best way to be able to meet the needs and expectations of your clients without sacrificing your own capital immediately?
A short-term working capital advance can be a great tool for construction business owners to meet and overcome the day-to-day challenges that come with running a successful enterprise. Let’s look at five ways that your construction business can use short-term working capital to effectively meet the needs of your clients.
What Is A Short-Term Working Capital Advance?
A working capital advance is a type of funding provided to a business to help it manage its day-to-day operational expenses. It is essentially a short-term loan that can cover expenses such as inventory purchases, payroll, rent, and other overhead costs.
The amount of the working capital advance is typically based on the business's cash flow and revenue, as well as its creditworthiness. Sometimes, a lender may require collateral to secure the loan, such as business assets or accounts receivable.
Working capital advances are often used by businesses that have seasonal fluctuations in revenue or need to make large investments in inventory or equipment. They can be an effective way for businesses to maintain their cash flow and keep their operations running smoothly during financial stress.
How Can A Short-Term Working Capital Advance Help A Construction Business?
1. Material Procurement
Procuring the necessary materials to start a project is one of the cornerstones of running an efficient construction company, it will determine the success or failure of your project. Having the necessary resources can help keep costs under control in the long run while delivering on a tight time schedule and ensuring the best overall quality of the finished project.
Construction companies can use short-term working capital loans to purchase necessary materials and supplies for a project. This will help them avoid delays caused by cash flow constraints and ensure a steady supply of materials on the job site.
2. Equipment Upgrades
Upgrading the equipment that your construction company owns is a surefire way to improve several aspects of your business. With new equipment comes increased efficiency, allowing you to complete jobs faster, and improved safety, keeping your workers safe, while reducing downtime that could occur from machines that often go down and need time to repair. While all of these are arguably profitable wins for your business, the upfront cost of these may be more than your company can afford to spend currently.
Luckily, construction companies can use short-term working capital advances to purchase new equipment or upgrade their existing equipment. This will help improve efficiency and productivity on the job site and reduce the risk of equipment failures while helping you complete your projects.
3. Staffing and Training
There are many crucial expenses associated with running a construction company, but one of the heaviest is ensuring that you have skilled labor that is well-trained to safely and efficiently perform their jobs and meet the demands of your projects.
Construction companies can use short-term working capital loans to hire additional staff or provide training to existing employees. This will help ensure that they have the necessary personnel to complete projects on time and to the highest quality standards.
4. Project Financing
On the broadest level, a lot of the above factors add together to contribute to one encompassing expense, project financing.
Construction companies can use short-term working capital loans to finance individual projects, covering costs such as labor, materials, and equipment. This will help them manage their cash flow and reduce the risk of delays caused by funding constraints.
5. Bonding and Insurance
While executing projects it is imperative that your business and your workers are insured for anything that could go wrong. Having a plan in place can help protect you from increased expenses later down the road, however, this in itself will require you to fork over a considerable amount of capital.
Construction companies can use short-term working capital loans to purchase bonds and insurance to secure a project. This will provide financial protection in the event of project delays, cost overruns, or other issues that could arise during the construction process.
Short-Term Working Capital Advance Options
$25K - $2M
4 - 16 months
Minimum of 1 year in business, a minimum $50K monthly revenue, a business bank account, and a personal credit score of 625
$5K - $250K
3 - 24 months
Minimum of 1 year in business, a minimum of $100k in annual revenue, business bank account, personal FICO Score of 625
$5K - $2M
6, 12, or 24 months
Minimum of 2 years in business, a minimum of $50K in annual revenue, $12K in annual credit and debit card sales, no credit score minimum
$2.5K - $500K
1 - 3 years
Minimum of 2 years in business, may have to provide collateral and a “strong” credit score.
Up to $1.4M
Varies based on your credit card transaction volume.
Minimum of 6 months in business, a minimum of $60K in credit card sales or $144K minimum among all transactions, and a minimum credit score of 500.
Backd’s Working Capital: The Financial Tool For Your Construction Business
When it comes to finding a short-term working capital advance to help your construction business grow, Backd is here to help.
Backd’s Working Capital Advance is one of the best on the market with competitive rates and terms that actually allow your business to grow. Backd offers working capital advances of $25K up to $2M with terms of up to 16 months.
If you’re considering taking out a working capital advance then apply with Backd today. Our application only takes 3 minutes to complete with funding arriving in your account in just 24 hours. Don’t wait to get the funding that your business needs to grow, take the first step and apply with Backd today.