In the past, getting a construction loan was a cinch. Property owners dished out generous payments before work even started. Contractors and their subcontractors could start paying for materials in advance. For those that needed to borrow, banks were generous with traditional low interest loans.
Then the recession hit.
World markets were pulverized. The construction industry was left in shambles. Many stopped building, and those who were left had few financing options. As the economy recovered, contractors still had incredible challenges. Property owners were less willing to make early payments. Banks became more selective and restrictive in their loan processes and approvals. They were especially stingy when it came to prospective borrowers in the construction and real estate sectors.
The alternatives to traditional loans
Naturally, alternative lenders sprang up to help fill the void. But the options were few. Factoring companies, purchase a subcontractor’s invoice once it is approved by the general contractor. But those subcontractors still need to bankroll that first portion of the work, including materials, labor, permitting, insurance and bonding, all on their own. Just that can cost more than 10% of a total project cost. For a company that is just making the leap from residential to commercial, or that moves from smaller commercial jobs to a big government contract, acquiring the capital needed for the first 30 to 60 days of a job can be a real challenge. Combine this with lingering debt or damaged credit scores from the recession, and business owners can face an almost impassable roadblock.
Daily debit loans provide cash upfront, which may seem ideal for cash-starved subcontractors. But it can quickly become an impossible situation as the lender pulls hundreds or thousands of dollars every day from contractor’s business checking account in order to repay the loan. Contractors have to scramble to estimate how much capital they actually have, and how much they’ll have tomorrow.
The Mobilization Funding difference
We recognized that these options were not meeting the needs of the small business owners working to literally rebuild our country. Our Mobilization Funding lending platform gives commercial contractors and subcontractors an opportunity to secure the capital they need before the job even begins. This revolutionary type of funding allows contractors to get and spend the money they need in order to do the job they were hired to do.
The collateral for the loan is the job contract itself. The repayment schedule is flexible and aligns with the payment timeline established with the owner or general contractor. We specialize in construction industry lending, so a general contractor can be assured that common adjustments like change orders and delays will not change the interest rate or nature of the loan. The loan is specific to each project, and prevents the business owner from having to give up any part of the ownership of his or her company.