The current boom in the construction industry is creating myriad opportunities for contractors, but the payment structure of some clients may leave the latter in a tight spot, observed a financing expert.
Most clients pay contractors when a project is finished, which leaves very few alternatives for finding funding to sustain operations. Traditional lenders, such as banks are a bit wary of taking the risk as they like to have solid collateral to back up such liabilities.
Still, New York City-based Excel Capital Management co-founder and vice president of sales Chad Otar said that there remain financing alternatives, which include:
- Merchant cash advance—a short term financing facility that can be guaranteed by future sales
- ACH loan products—caters to establishments that do not process credit card payments, has a fixed payment period, and may need a personal guarantor
- Equipment financing—a type of credit extended for the sole purpose of acquiring new equipment
- Business lines of credit—a rotating loan that allows access to a fixed amount of credit
- Term loans—a bank-backed loan that has a specified repayment schedule with adjustable interest rates
The cash flow from such funding sources can be used to expand the business, purchase new equipment and sustain operational expenses such as employee payroll , bills payment, insurance and overhead costs.