Business loans are an integral part of business finances. These loans ensure that a business does not plunge into liquidity crises and has enough funds for sustainability and continuity. As for general contracting companies in the construction industry, it helps them deliver projects on time.
But the long business loan application processing is something that becomes a headache for them. The time-consuming loan processes will drain your energy. Therefore, we would spill the beans and let you know about the five tips to help you improve your construction loan processing time.
What Is a Construction Business Loan?
Before we move on to the tips, we should understand what a construction business loan is. It is not suitable for a business owner looking to purchase, build, redesign or refinance their property. Any business with such an aim should consider going for a commercial loan.
Construction business loans are for general contracting companies that are looking to expand and remodel their operations. It includes various lines of credit, such as long-term loans, machinery financing, business credit cards, etc., to help support the general contracting company's ambitions.
Since different businesses will have various ambitions, you won't find a one-size-fits-all construction business loan. Let's go over some tips to help you speed up the construction loan processing time.
Tips to Improve Your Business Loan Application Processing Time
The following tips will help your business reduce the loan processing time and get the funds in your hands more quickly.
1. Have Complete Transparency
First and foremost, transparency is a vital element to help you establish trust between your general contracting business and the lender. The last thing you want to do is present a fabricated image of your company's financials. Not only will it lead to more time for lenders to authenticate it, but they will reject your application ultimately.
Therefore, checking your company's finances and other documentation is imperative before submitting them. It will ensure you don't give any documentation with wrong information. Most importantly, it is optimal for you to be honest and transparent regarding your intentions with the loan.
If you are looking to get a loan for purchasing new machinery or equipment for your subcontracting business, you should tell the lender about it. Also, there should be an accurate report to show that how the equipment or machinery will benefit and contribute positively towards your business's success.
2. Maintain a Good Credit History
Another important thing that plays a crucial role in loan application processing time is your credit history. Banks prefer to give out loans to businesses for expansion, not debt management. So, if you have bad personal or business credit score, it will prolong the time to get a loan.
Financial institutions are more than happy to facilitate customers with great credit scores first. Therefore, keeping a good credit score is vital to bring down the approval time of construction business loan processing. You should consider eliminating smaller debt and avoid taking new loans.
3. Present a Clear Business Plan
The construction and the real estate industry have seen a significant growth over time. But that does not ensure your general contracting business will also succeed and guarantee your loan payments. Banks will need a robust and clear business plan that includes every detail regarding your future.
It should state how your business will manage loan payments in case of a recession. Also, it is vital to mention how taking a loan will help your business generate more money for your business. Thus, it will be enabling you to pay off the loan.
4. Prepare Financial Statements
Most businesses operating on a small level don't create any financial statements, such as balance sheets or income statements. Usually, they don't pay attention to it since they don't want to go into the complexity of hiring an accountant to manage their bookkeeping and financial transactions.
However, it can put your subcontracting company at a disadvantage when applying for a construction business loan. Banks and other lenders look at these reports and statements to assess the company's financial health. And if you don't have them, the bank will ask you to get one.
Thus, you will have to look for an accountant to create a financial statement, which will increase the time of the loan approval process. So, it is better to prepare and organize your financial statements beforehand instead of handling them at the last moment.
Also, make sure you have healthy gross and net profit margins to compel banks to approve your loan quickly. You increase your sources of income or bring down your expenses to improve your net profit. In a nutshell, your financial statements should not be the reason for the delay in loan approval.
5. Choose the Right Leader
Last but not least, sometimes you might have everything right, but the lender will still take up a lot of your time approving your general contracting business loan. It is because they have a rigid structure where the application has to go through different stages for approval.
Therefore, you should choose the bank and financial lender that does not have a reputation for bad taking up too much time issuing loans. You can do thorough research regarding different banks and read about their terms and conditions to have a better idea about the loan processing time.
Go For the Best Digital Solutions
As a general subcontracting business, there are many things you will be dealing with simultaneously. You might not have the time to follow up on your loan application due to a bundle of tasks. Therefore, leveraging new digital solutions can be great for your business.
Talking about digital solutions, businesses need to have automated payment and a virtual debit card to receive money from their clients. That is why choosing VERGO will be an optimal decision for your subcontracting company.
It is a robust and state-of-the-art solution that stands up to the needs of businesses in the construction industry, including general contractors, plumbers, electricians, and many more. So, incorporate it into your business operations today and reap the benefits you can get from its features.
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