Construction Companies Are Less Dependent on Bank Loans

July 5, 2018 by CNH Finance, LP in category “Financing”

Construction companies can burn through a lot of working capital on a single project. Being able to complete contracts while simultaneously lining up future jobs takes a lot of work. Up until recently, many construction companies stayed afloat by taking out loans against existing contracts. However, recent trends have shown a decrease in construction companies relying on debt-based loans.

Construction Companies in a Strong Economy

There is no denying that our country is experiencing an economic surge. Manufacturers are producing more, consumers have more disposable income, and there is a big demand for new construction – both commercial and residential. Even smaller construction companies are finding more lucrative opportunities compared to just a few years ago. But running a successful construction company of any size requires existing capital reserves to purchase materials, hire workers, and to configure logistics so projects stay on track. Taking out loans works against the overall success of any business, because the revenue from a job well-done goes towards paying overhead expenses, payroll, and the debt owed to various lenders.

An Alternative to Traditional Loans

Instead of taking half a step backward with debt to move a step forward, construction companies are leveraging assets to create an internal source of working capital. Construction companies own equipment, machinery, vehicles, receivables, and even facilities, each of which has a determined value. The value of those items can be used to create a revolving line of credit. This renewable source of working capital gives construction companies the ability to cover expenses and even grow without needing to take on debt through bank loans. By reducing the amount of debt on the books, as well as the amount of revenue that immediately goes to creditors, construction companies have the ability to see out larger contracts, upgrade equipment, and advertise in new markets.

Financing that Grows with Your Business

Having a revolving line of credit without being dependent on a bank is great. Asset based lines of credit go one step further, by offering increased amounts of financing as your construction company grows. As sales increase or equipment is added or upgraded, the spending limit on the line of credit also increases. This gives some construction companies a big advantage over those that rely on debt-based loans.

CNH Finance specializes in asset based lines of credit. Contact our offices today to learn how we can help you grow without debt.

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