Applying for a loan in today’s highly competitive construction market has never been more complex. Skepticism about the stability and growth potential of the industry as a whole has led to the implementation of increased control, processes and procedures by most lenders. All too often they will restrict themselves to making loans solely to businesses that exhibit strong management ability and steady growth potential.
Any contractor with a need for term financing will therefore have to be armed with a range of specific deliverables to meet these criteria. These deliverables may include a written business plan, a solid management structure and a cohesive network of systems and controls. Even when you’ve overcome those hurdles, you’ll find that a cash flow projection demonstrating your ability to repay both loan principal and interest will be mandatory.
If you’re a new customer, you’ll find that your lender expects you to have all of the above components in place before they will even consider your suitability. It’s no surprise that most construction specialists view borrowing money with some trepidation. No matter how stable your company may be, many lenders will tell you that you have limited loan options. Many construction-friendly lenders are only friendly when they’re talking about asset-based term loans. In an industry as volatile as construction, this type of loan offers lenders a predictability of repayment and a degree of security control.
Contractors have historically had two options for term finance: long-term loans and equipment financing/leasing. Both types of lender have particular specialties that can be utilized according to your individual needs. In both cases, however, you’ll need to be well prepared to get to the stage where you are deemed “loan-worthy”. Although the procedures are complex, it is possible to find the loan that best fits your circumstances.
Term loan evaluation can be an extremely rigorous and sophisticated process. Your overall business set-up, management team, collateral availability, project and feasibility will all be scrutinized and you will have to provide a full set of financial projections. If you’re opting for a term loan to finance equipment you may even have to provide a dual scenario financial argument – with a set of financials based on your current set-up and one based on having the desired equipment in place.
Another vital consideration if you’re seeking equipment finance/leasing is the actual make-up of the contract. It is all too easy to default on such agreements and it takes an experienced eye to study the terms closely and assess the effective interest paid during the life of the lease.
Depressing as it may seem, it’s obvious that today’s successful loan application is no longer a question of simply asking for money. No matter how great your construction experience and how successfully your company operates, you’ll also be expected to show defined skills in packaging, presenting and picking your data before you can negotiate the pitfalls and complete the process.
Here at Druml Group, we offer a variety of customized and proven loan solutions. We can, for example, align you with a key lender for both specific equipment purchases and fixed asset acquisitions in general. While we do not offer discounted interest rates, we can help you choose the right source of financing, at the right time and at the right rate.
In addition, we can help you negotiate leasing or finance agreements, or simply assess whether a proposed agreement is a fair deal.
Last, and by no means least, we can work with you to ensure that the information you need to present to prospective lenders is accurate, well prepared and presented in the appropriate formats.
Give us a call today and we’ll guide you to the easiest and most effective means of accessing the loans you need.