When you’ve worked in the construction industry either as a salaried worker or an independent contractor, the comparatively low pay, lack of a clearly defined career path and dearth of opportunities for progression can become stifling and infuriating. After a while you start to get an entrepreneurial itch that you just need to scratch. In an age where more and more SMEs pop up out of nowhere every day, why shouldn’t you put your knowledge and expertise to work in your own construction business? Unfortunately, however, you may soon realize that gaining the funding needed to start your own construction business is a unique challenge, even amongst the entrepreneurial community.
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The challenges of the construction industry
In the digital age, we’ve seen countless people bootstrap a business from out of nowhere with little or no overheads. Obviously a construction business cannot be bootstrapped. The overheads for construction are colossal, requiring significant spending on tools, equipment, transportation trucks, raw materials and hours upon hours of skilled labor. Banks have been skittish about lending ever since the financial collapse of 2007-2008, and unfortunately, unless you have a significant amount of your own capital to invest, you’re unlikely to find much help from mainstream financial institutions. Banks like safe bets and due to the high overhead costs, construction isn’t among the safest of bets.
Fear not, however, with a cogent business plan and some well-informed cash flow projections, you’ll likely find more success with any of these alternative finance solutions…
Unsecured loans
Many businesses use unsecured loans from alternative lenders to secure business capital if they’ve been turned down by a bank. The good news if you like in the UK is that under the Small Business Enterprise and Employment Act of 2015 if you are turned down funding by a bank, they are legally obliged to help you find alternative funding.
Leasing / hire purchase
If you want to start shopping for trailers and more at ConstructionTrailerSpecialists.com but don’t have the ready capital to pay up front, this doesn’t mean the end for your construction business. Asset finance will enable you to acquire the equipment straight away without having to come up with the cash up front. You can either lease or opt for hire purchase. Leasing is beneficial for new businesses as you have access to the newest equipment but on the other hand you never actually own it. Hire purchase on the other hand is similar to leasing as you pay a small monthly sum (including interest) except that you own the equipment at the end of the hire purchase period. This is more appropriate for equipment that you intend to use regularly and on a long term basis.
Bridging loans
If you need short term finance to purchase land or resources on behalf of a client, or even if you’re experiencing a temporary cash flow problem, a bridging loan can be an ideal solution. Unlike most unsecured loans they can be approved and transferred into your business account quickly, enabling you to move quickly on prime capital investments that can grow your business. However, these should only be considered on a short term basis as they tend to come at high interest rates.