If you are the owner of a construction company or an aspiring entrepreneur, you may be looking for a way to get the financing that your business needs. The first thing that most people think about is how to get a construction loan with bad credit. You may need these business loans if you’re looking to buy equipment, pay for unexpected expenses, take on new projects, recruit highly skilled staff to challenge your competitors, and manage and optimize cash flow management.
If you are trying to find a construction loan but have a bad credit score, then it’s time for you to read this article. It will show you how getting an unsecured construction loan is not always as difficult as it might seem. Bellzone Funding LLC has outlined certain steps you need to take in order to get a construction business loan with bad credit and improve your credit score.
Overview Of The Construction Industry
Construction is a high-risk industry, which means it will require higher rates if you have bad credit. The percentage of construction loans that are approved with poor credit scores varies. Although rates are significantly higher, there are some lenders that offer construction loans to those with bad credit. On average, the interest rate on these loans ranges from 8% to 15%.
Construction companies running out of cash often turn to construction loans to fund their projects and lease or buy expensive equipment necessary for the functioning of their projects. Most of these loans have a low-interest rate, but the borrower must have good credit in order to qualify. Construction businesses can also try debt financing when they borrow money from a private lender instead of a bank.
Qualifications For Getting A Construction Loan
Construction loans can be difficult to obtain without a credit score and good credit. When applying for a construction loan, it’s important to have experience and capital. The bank will also want to know that you have the ability to repay the loan with interest. Experienced contractors often have access to sources of financing beyond traditional loans with interest rates.
Many people are discouraged from starting a small construction business because of the requirements for getting a construction loan. You might be wondering what qualifications you have to have in order to apply for one. Is your credit bad? Do you live in an area with high unemployment rates? The good news is that these aren’t the only qualifications. Banks require these companies to meet the average credit score and fulfill collateral requirements, but they do not require applicants to meet these qualifications to qualify for a bank loan.
Another way of securing loans for your business is through informal sources like relatives, friends or investors who have been connected to you for a long time. However, there are private lending institutions that are established with an objective of assisting small businesses and providing loans to them regardless of a bad credit score.
It is not impossible to secure loans with a bad score, it’s just that you would have to pay a little higher interest on the loan than the average interest rate. The source you choose to obtain funds from depends on the decision of how you would use those loans. In case you are planning to invest in equipment & technology, it would be right to secure construction equipment financing loans .
How To Improve Bad Credit?
It’s not easy to build up your credit when you have bad credit. You need time and discipline, but both of these things are not easy to come by after the job loss or downfall in your business. However, there are ways that you can increase your credit score:
- The most common way is to simply pay off what you owe as soon as possible. If it’s an account with a high-interest rate, transfer the balance to one with a low-interest rate or even zero-percent APR.
- Second, check your local utility company website for affordable energy plans – if they offer them – and switch over if you’re paying more than $150 per month in electric or natural gas bills. This will lower your debts and improve your credit score since it will show up on your bill every month as “on-time payments.”
- Another way is signing up for electronic or automatic billing for all accounts that provide this option. Some companies send out emails when bills are due so that you can make sure that you don’t miss any payments.
- Finally, do not open any new lines of credit (e.g., loans) unless necessary. One of the best ways to repair bad credit is to open a secured card account and set up automatic payments from your bank account each month so that your account may not reflect any outstanding dues affecting your credit score.
The steps to getting a construction business loan with bad credit are relatively simple. All you need is a good understanding of the interest rates and terms and a plan of action that will be achievable and generate enough income to cover loan payments. To sum up, when applying for a construction business loan with bad credit, it is important to know your numbers and be prepared to answer questions.
If you don’t know the answer, then you should be able to find it quickly. You might also want to reconsider asking banks for a construction business loan with bad credit or try looking at other options. Then, get in touch with us and secure your construction loans for running your businesses smoothly and efficiently.