Construction Company Funding: The Essential Guide to Construction Company Loans

Two construction workers working on roof beams outdoors

Understanding your funding options and applying for the right small business loan for your business can be confusing. Our Industry Funding guides make it easy to compare your funding options and choose the right loan for your business, whether you’re just starting up or are looking to grow an existing business.

Getting Started with Construction Company Funding

The construction industry is a major contributor to the country’s economy, with more than 680,000 employers and over 7 million employees generating nearly $1.3 trillion worth of structures each year in the United States.

Whether you’re looking to open a new business, bid for a new project, fill seasonal gaps, or expand your existing construction company, construction businesses of all sizes and specialties can benefit from an infusion of working capital.

Small business funding is available for remodelers and renovators, contractors, electricians, plumbers, HVAC technicians, landscapers, specialty tradespeople, and all other construction specialties. Funding can be used to help you overcome the challenges unique to running a construction business, such as:

  • Seasonality: Construction businesses are among the most susceptible to unexpected weather and seasonal demand fluctuations. It can be difficult for these businesses to maintain stable cash flow, especially in the off-season.
  • Supplies and materials: Your business may incur significant expenses purchasing necessary supplies and materials to bid for new projects or before you’re paid in full for completing a job.
  • Billing cycles: Clients may not pay till the project is completed. In the meantime, you still need to pay your employees and acquire supplies to complete their project.
  • Bidding for business: Opportunities to bid for new projects may come along unexpectedly, and you may need working capital up front to pitch new clients that will allow you to grow.

Construction Company Loan Options

Most “construction loans” are designed to help property owners (not construction business owners) finance specific projects, such as building a new home or office. Aside from these “self-build” construction loans, multiple types of funding are available to help construction businesses overcome challenges and continue to grow, including long- and short-term funding, as well as secured and unsecured loans. In this guide, we’ll take a look at 5 types of construction company loans:

  1. SBA loans
  2. Bank loans
  3. Alternative funding
  4. Lines of credit
  5. Equipment financing

Let’s take a closer look at these options:

1. SBA construction company loans

SBA loans are not actually provided by the Small Business Administration—instead, your funding is supplied by a commercial lender like a bank or credit union, and the loan is guaranteed by the SBA up to 85%. This reduces the risk to the lender and encourages lenders to fund more small businesses.

SBA loans have the lowest rates and best terms, making them the preferred loan for many small businesses, including construction companies. However, the application process for SBA funding is significantly more difficult than other forms of construction company funding, with  strict eligibility requirements and extensive application forms that require years of detailed personal and business financial information. It can take weeks or months to process your application with no guarantee of approval. Most applicants are rejected, especially those with low credit, a history of unstable cash flow, or those seeking a short-term loan.

SBA loans are available to both start-up and existing small businesses. Several SBA loan options are available, but there are typically two types of SBA loans that are ideal for construction companies:

  • 7(a) Guaranteed Loans: These are the most commonly sought SBA business loans for construction companies. 7(a) Guaranteed Loans up to $5 million are available with fewer restrictions on how funds are used, longer repayment terms, and lower interest rates. These loans typically require collateral and follow similar guidelines to standard term loans. This program also includes Express loans, which have a turnaround time or 36 hours or less and generally don’t require collateral for loans under $25,000.
  • 504 Local Development Company Program: 504 loans are long-term, fixed rate loans that are typically used to purchase real estate or equipment. These loans are provided by CDCs through commercial lending institutions and require the borrowing business to use the funding to create or retain jobs or uphold other public policy goals, such as supporting minority-owned businesses, rural development, or revitalizing a business district.


  • Lowest rates and typically better terms
  • Large loan amounts are available, up to $5 million
  • Most applicants are rejected, especially those with low credit
  • Extensive application requiring years of detailed business and personal financial information
  • Can take weeks or months to process with no guarantee of approval
  • Some loans restrict how you can spend your funds

2. Bank loans

Commercial banks and credit unions also offer construction company funding. Terms and rates are competitive but are not as low as SBA-guaranteed loans, and will typically depend on the size of the loan and your credit history. Lending requirements are strict, but may not be as restrictive as SBA loans, especially if you have an existing relationship with your lender. However, similar to SBA loans, it can take weeks or months to find out if your bank loan application has been approved, and approval is never guaranteed.

Because of seasonal volatility and often unstable cash flow, commercial lending institutions often consider construction businesses to be a higher risk industry. In addition, banks typically prefer to grant loans for larger amounts or loans to large, established businesses. For these reasons, it can be tough for construction businesses to acquire funding from a bank, especially for smaller businesses or companies looking for smaller loan amounts.



  • Low rates and good terms depending on size of loan and credit history
  • Slightly less strict application requirements than SBA loans
  • Many applicants are rejected, especially small loan amounts and applicants with low credit
  • Extensive application requiring detailed business and personal financial information
  • Can take weeks to process, with no guarantee of approval
  • Some loans restrict how you can spend your funds

3. Alternative funding

Alternative funding from direct online lenders like Greenbox Capital® is easier to acquire than SBA or bank loans for construction companies. Rates are higher than these traditional forms of funding, but with flexible lending requirements and less focus on factors like credit score, alternative funding is often the best option for construction companies.

Alternative lenders base your approval on the health of your business and are more lenient with credit records and financial documentation. They are also more likely to lend to newer businesses, though some will not lend to start-ups or businesses in operation for less than 6 months. Approval can be made in as little as 24 hours, making alternative funding an ideal choice for construction businesses that need fast funding to take advantage of an opportunity to bid on a big project or cover unexpected cash flow shortfalls.

Multiple types of short- and long-term funding are available depending on your medical practice’s needs, including lines of credit, alternative small business loans, and real estate collateral loans, as well as non-loan financing such as merchant cash advances and invoice factoring, typically with no limits on how you use your funding.



  • Faster approvals with funds deposited in as little as 24 hours
  • Easier lending requirements
  • No restrictions on how funds are used
  • More likely to fund younger businesses
  • Higher rates
  • Daily or weekly repayment terms depending on type of funding

4. Lines of credit

Business lines of credit function similarly to business credit cards but with longer terms and lower rates, and are available from traditional banks as well as alternative lenders.

This type of construction company funding offers the most flexibility, allowing you to draw from and repay the line of credit whenever you need with no restrictions on how funds are used. You’ll only ever pay interest on the amount you borrow. This flexibility makes lines of credit ideal for responding to unexpected complications like repairing equipment or restocking raw materials, purchasing new equipment or technology, bidding for new jobs, shoring up cash flow during seasonal dips, and other major expenses that don’t require a larger loan but which can still strain your cash flow.



  • Only pay interest on the amount you borrow
  • Draw and repay funds as needed
  • No restrictions on how you spend your funds
  • Lower rates and higher limits than business credit cards
  • Tougher application requirements
  • Lower amounts than other forms of funding

5. Equipment financing

Equipment financing is designed to help fund the purchase of expensive construction equipment, such as bulldozers, lifts, excavators, loaders, forklifts, and more.

With this type of financing, your lender will typically supply 80-100% of the cost of the new equipment. The equipment serves as collateral to secure the loan, so equipment financing typically has lower rates. You’ll repay the loan in regular instalments, typically monthly, with the term often dependent on how long the lender anticipates the equipment will last.



  • You own the equipment instead of leasing it
  • May be easier to qualify for because equipment serves as collateral
  • Funding can only be used to purchase specific equipment
  • Higher rates than other funding types
  • Very specific equipment or equipment that goes out-of-date quickly may have higher interest rates

What Is The Best Construction Company Loan?

The best construction company loan depends on your goals. Your funding, including the amount you borrow and your repayment terms, should always serve a specific purpose that aligns with your business’s goals, such as purchasing new equipment, acquiring raw materials to complete a project, financing a bid for a new project, or boosting your marketing campaign.

For short-term funding, non-loan forms of financing such as merchant cash advances or online invoice factoring can provide a quick infusion of working capital. These types of short-term financing can be used to fill in cash flow shortages during the off-season or while you wait for clients to pay after a project is completed, as well as for things like investing in marketing your business or kickstarting your growth by giving you the funds you need to bid for new projects.

For long-term funding, SBA 7(a) loans offer the best rates and terms, but are the most difficult to acquire. Bank loans may be a good alternative, but can also be difficult for construction businesses to acquire because of cash flow volatility. If neither of these options are available to you, alternative lenders also offer long-term funding like small business loans or collateral business loans.

For fast funding, your best bet is always an alternative lender. These lenders can approve and deposit funds in as little as 24 hours, while SBA and bank loans can take months with no guarantee of approval.

How To Use Construction Company Funding

Construction company funding can help construction businesses in all specialties overcome the unique challenges of their field, including:

  • Seasonality: Many construction businesses, especially those that operate primarily outdoors, experience seasonal lows during the winter months, while those that can still safely operate have to manage the challenges associated with winter weather. Despite seasonal lows, fixed expenses still need to be paid and can put a strain on your business’s cash flow.
  • Equipment: Construction businesses require expensive equipment for their jobsite and their office. It can be difficult to afford these items when starting up a new business, and repairs can also be costly.
  • Raw materials: Raw materials are essential for pitching, starting, and completing jobs on time, but they require significant up-front investment.
  • Weather: Inclement weather can create delays that are completely beyond your control, extending project timelines and increasing costs.
  • Labor shortages and high employee turnover: Construction workers are retiring faster than the younger generation can replace them. Offering incentives or benefits can help attract younger workers and cement loyalty with existing employees.
  • Cash flow: Cash flow for construction businesses can be stressed when you’re dealing with seasonal fluctuations and late or slow-paying clients. Short-term financing like invoice factoring can help bridge the gap between payments.
  • Safety: The construction industry leads all industries in the total number of workforce deaths. Injuries sustained on the jobsite can also lead to significant losses in productivity and wages. Regular and ongoing training is the best way to keep employees safe on the jobsite, but creating and implementing these programs can strain your cash flow.
  • COVID-19: The COVID-19 pandemic halted many new construction projects, restricting firms to working only on projects already in progress and further stressing cash flow.

Construction company funding can be used for more than navigating the challenges faced by construction businesses—it can also be used to grow or expand your business, such as:

  • Hiring staff: Expand your team or hire subcontractors so you can take on more projects, bid for larger projects, or offer more comprehensive services.
  • Bidding for bigger projects: Upgrade your equipment, hire workers, or take on subcontractors so you can bid on bigger projects and compete with larger companies in your area.
  • Expanding your facilities: Build a new office, renovate your existing space, or move to larger facilities to support your business’s growth.
  • Boosting your marketing: Advertise your business, create or update your website, or use direct marketing to reach new clients, especially if you’ve taken on more staff or expanded your services to attract larger projects.
  • Embracing technology: Building Information Modeling (BIM), telematics, and emerging technologies like virtual reality or augmented reality, robots and drones, 3D printing, connected devices, and autonomous vehicles can help construction businesses improve communication, productivity, and safety.

How To Apply for a Construction Company Loan

Construction companies are often considered to be a riskier loan applicant because of seasonality, cash flow shortages, and volatility of demand. Here’s what you need to know before applying for funding for your construction company:

  • Typical revenue and billing models for construction businesses—getting paid once a job is complete, for example—can result in inconsistent cash flow even if your revenue is strong throughout the year, which can make it difficult to get approved for construction company funding. Requesting partial payment up front to cover raw materials expenses, billing clients quickly, offering discounts for early payment, and making it easier for clients to pay can all improve your cash flow.
  • Construction businesses are particularly susceptible to economic fluctuations. Combined with seasonality, this volatility can make these businesses seem riskier to lenders.
  • If you’re applying for a loan to finance a specific project, you may be asked for details about the project, including specific and detailed building plans, construction contracts, and cost estimates. You may even need to work with an appraiser to analyze your project and compare it against other similar projects in your area.

The steps you’ll follow when applying for a construction company loan will be similar to other industries.

Learn more about how to apply for small business funding

Frequently Asked Questions

What is a construction loan?

A construction loan, also called a “self build loan”, typically refers to a short-term loan used to finance the building of a home or another real estate project. Either the builder or the buyer will take out a construction loan to cover the costs of the project before obtaining a traditional mortgage. Terms typically last one year, after which the construction loan can be refinanced into a permanent mortgage. Because of the risks involved, self-build construction loans typically have higher rates and larger down payments.

Will the SBA do a loan for a construction company?

Yes, the SBA will do a loan for a construction company if you are able to meet or exceed their strict requirements for eligibility.

Greenbox Funding Options for Construction Companies

Get the construction company funding you need

As an alternative lender, Greenbox Capital® can approve more construction company loans than traditional lenders. We can also approve your construction company funding faster, with funds deposited in as little as 24 hours. We provide several types of small business funding to help grow your construction business, with funding from as low $3,000 up to $500,000.

Greenbox Capital® funds all construction specialties. Our expert Funding Advisors will work closely with you to determine which funding option will help you achieve your goals without compromising your business’s cash flow.

Learn more
Contributor and expert in finance and loans, business and economics