How To Get Funds For Construction Business?

Introduction

Raising money for a business is very difficult. It is one of the greatest challenges that are faced by the business that are just emerging in the market. There are many managers of the business in the market, who rather than looking out for financing options of funding a new business will look out for managing the activities that are carried out for a business on a day to day basis. In this article, we are going to discuss about a capital oriented business like construction business. Raising funds for such a business is critically important. A construction company always fails to acquire new projects if they at any point of time are incapable of securing themselves a funding on the terms which are quite reasonable.

Business plan

You, being an owner of a construction company need to draft a well-organized business plan for the day to day activities of your construction company. There should be a detail description of business services that you are going to provide your clients with. The plan should include the aspects such as the project management, services on subcontract basis, direct construction services etc. It should include the expansion plans of the companies as well as the segments of the market that is targeted by the business of the construction company. There should also be a justification of why your business in the construction sector is said to be different than the other business that exist in the market.

Finance projections

You have to manage and create your financial projections. The projections should be real and there should be some evidence to support it. You should also mention what assumptions have you made. You should include your plan as to acquire how many projections each year. There are to be attached, the details of the revenue and the expenses of the projects that your company is going to take up. When you take up a business project, you are supposed to invest in the cost of purchasing the raw materials. The cost of the raw materials can be quite volatile and needs to pay particular attention to it. You should be ready and be able to protect any swings that are encountered in the prices of the raw materials. You should also discuss about the tackling of the union issues that might arise from the decisions made by the management.

Schedule

Develop a schedule highlighting a detail of the sources and the uses of your construction company. The sources should also include the upfront and also the cost involved in the ongoing projects as well. There should also be a brief section including the losses that are faced by your company which you intent to overcome once your company start making profit. The main costs are encountered in the purchasing of the raw materials and the heavy machinery and tools and equipment that is used for construction. The sources of funding should also highlight as to what contribution you are yourself making in the project in terms of funding for the project.

Commercial Banks

List a number of commercial banks by contacting your business lawyers. These banks may have a loan officer who might have given some funding to the construction business before. Construction businesses being asset heavy industries, insist on loans such that they are asset based loans only. The secure collateral for your bank loan will be in the form of construction equipment and the raw material inventory of you construction business.

Small Business Administration

Seek a loan or perhaps ask for a grant from the Small Business Administrations (SBAs). The SBA is the one which is able to finance thousands of projects in various sectors and hence should be able to allocate a certain amount of the funds to your business that is pre allocated to the funding for construction oriented businesses.

Equity investors

Approach equity investors for funds. You can approach the angel brokers as well as the venture capitalists. You have to deal with people who have an experience of investing in businesses such as construction oriented companies in the past. The equity investors are supposed to be given the percentage of ownership of your company. In return for ownership, you can expect these investors to invest heavily in your company projects. This way, you can develop the overall strategy of the company. In addition to that, due to the experience that they have, they might be also able to give you day to day advice regarding the daily activities of your construction company.

Project finance companies

Meet the officers who are in charge of investment funding in project finance companies. You can take the option of funding from a project finance company only if you are able to find a source that is permanent source for financing your projects. There are project financing companies who look at a detailed report of a project and then finance the project. So keep the business requirements and your associated business plans ready for financing.

Thus, in this article, we have seen the various aspects of getting funds when you are on the verge of starting a business in the construction sector.

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Disclaimer: The suggestions in the article(wherever applicable) are for informational purposes only. They are not intended as medical or any other type of advice