Here’s what you need to know if you’re interested in a business loan for your contracting business.
The Types of Contractor Business LoansIf you conduct research, you’ll find that there are a wide array of loans for contractors. It’s a good idea to compare all your working capital options and choose the best fit for your unique situation. Consider factors like how much money you need to borrow, what you need the funds for, and your preferred repayment period. Don’t forget to consider your credit score and unique business goals as well. The most common types of contractor business loans you may come across include:
- Equipment Financing: If you need to pay for new equipment or update old equipment to perform your work, equipment financing makes the most sense. Once you receive a quote for the equipment you’d like to purchase, the lender may finance you all or part of the cost. The equipment will serve as collateral so if you default on your loan, the lender will seize it.
- Business Credit Card: A business credit card can be the ultimate financing option if you’d like to pay for everyday expenses like office supplies and materials. As long as you make timely payments in full, you’ll build your credit and enjoy perks like cash back and travel points.
- Business Line of Credit: As a contractor, you may be unsure of exactly how much money you need to borrow. That’s where a business line of credit comes in; it offers larger loan amounts than a credit card and allows you to withdraw as much or as little as you need. Therefore, you’ll only pay interest on the amount you borrow.
- Term Loan: A term loan may be the way to go if you have a specific expense in mind and know how much it will cost you. With a term loan, you’ll receive a large sum of money upfront and repay it over time via monthly payments.
- SBA Loans: If you need a loan to cover a wide array of expenses, an SBA 7(a) loan is ideal. Not only does it offer a low interest rate and long repayment term, an SBA 7(a) is guaranteed by the SBA. This means, the SBA will take care of a significant part of your loan if you default.