Financing For Contractors
If your contracting business needs financing, Mobilization Funding is here to help.
As a contractor, you face an uphill battle where cash flow is concerned. The construction industry in general, has many unique financial challenges that hinder your ability to take on new projects, cover upfront costs, and ensure that you can keep your bills paid month to month, that is unlike any other industry when it comes to funding Whether you work independently or you own a growing company, securing funding that aligns with your pay cycle is crucial to keeping your projects on track and your business thriving.
Fortunately, Mobilization Funding can make the otherwise frustrating process of acquiring financing for contractors fast, easy, and secure.
When To Consider Financing For Contractors
Managing your project and business finances as a subcontractor or general contractor can be challenging, to say the least. As your business grows and project volume increases, you must juggle an increasingly complex cash flow situation. Many companies that to us for funding face issues such as:
- High Upfront Costs - Every new project comes with upfront costs like labor, materials, permits, and insurance. A bigger or higher volume of projects is great until you calculate how much cash you’ll need to mobilize prior to receiving that first invoice.
- Delayed Payments - It’s important to negotiate payment terms that work for you and your revenue cycle - keeping in mind that delayed payments are common. We see contractors waiting 90 days or longer from the date the work was completed to receive full payment. During this time, you’ll still have to pay for ongoing expenses, including payroll, equipment, and business software (just to name a few).
- Scaling & Investment Opportunities - Most contractors who contact us are rapidly scaling and expanding their businesses as new projects arise. Without sufficient cash on hand, you won’t be able to capitalize on these opportunities and invest in the growth of your business. Getting an injection of capital, whether through us, or not, can help you grow your business at a steady pace without disrupting day-to-day operations.
- Temporary Shifts in Projects - Like any business, construction and manufacturing contractors are not immune to seasonal or economic shifts that slow things down. If you’re not taking on as many projects as you were this time last year, you may find yourself in a cash crunch that must be remedied.
If any of the above situations apply to your business, contractor financing could be a viable solution to keep your organization running smoothly and capitalize on new opportunities.
How Are Construction Projects Financed?
In an ideal world, you’ll be self-financing your construction projects using funds paid upfront by the client. However, it’s not always possible to secure a deposit ahead of time, in which case you’ll need to fund the project using any available cash attained from previous jobs, that you still may be waiting to be paid. Using profits from one job to pay for another is often a risky endeavor, and it almost always puts businesses in a repetitive cycle of poor cash flow.
Seeking out funding is a solution that can break this poor cash flow cycle. This might come in the form of a traditional business loan, a line of credit, or short-term financing tailored to contractors — like the solutions we offer at Mobilization Funding. You can learn more about how contractor financing works to see if our short-term funding solutions would be right for your business.
“I can’t tell the story of my business without talking about Mobilization Funding.”
We asked Prime Electrical's CEO & founder Camell Williams to share why he became a Mobilization Funding client and what his experience has been with our company.
Benefits of Contractor Financing
Contractor financing is an essential part of the construction industry, as it ensures that contractors have the funds they need to overcome cash flow gaps on their projects, or tackle upfront costs that they need to get the project started.. If you’ve never acquired any kind of financing before, you might be skeptical about how it all works and what it will mean for the short and long-term success of your business. We’re here to put your mind at ease. With the quality financing solutions available through Mobilization Funding, you can expect all of the following benefits:
Easier Cash Flow Management
We talk a lot about cash flow because it is one of the top concerns we discuss with contractors in need of funding. Having a healthy cash flow is vital to any business, but it’s particularly challenging for contractors who may offer flexible payment terms or have long or unpredictable project timelines. The expenses that are incurred on a project must be paid in order for the project to move forward, with very few exceptions. Project-specific cash flow management helps bridge the gap between the time you incur these costs and when you receive payment, ensuring you have the cash flow necessary to keep your projects moving forward without any financial strain.
Reduced Stress Due to Financial Pressure
In addition to managing day-to-day operations, you must also make the financial decisions for your business. When your cash flow is tight, this can be an extremely stressful responsibility. Contractor financing alleviates this pressure by providing a quick source of funds to see you through a given contract or purchase order, and keeps the funding on the project. By taking away a lot of stress associated with cash flow issues, financing can help you focus on delivering quality results on the project, without the luring financial pressure.
Complete Preservation of Personal and Business Credit
For many types of financing, your personal or business credit will take a hit just to apply. This is especially true for traditional loans or lines of credit. Rather than letting your business needs affect your credit, you can opt for financing that makes the project or purchase order the focus of your application. A contract-backed loan, for example, uses the contract as collateral, rather than your home, car, or business equipment. This approach helps preserve your credit score and reduces the risk of overextending your finances.
Types of Contractor Financing
At Mobilization Funding, we offer various financing options unique to specific projects of PO needs. Understanding these options can help you choose the right solution for your business.
Contract-Backed Loans
Contract-backed loans are based on the total contract value of the project. The loan amount is determined by the contract size, and repayment is aligned with the project payment timeline. This type of financing is ideal if you need funds to cover the initial costs or cash flow gaps of a project but don’t want to put your credit or business assets at risk.
With a contract-backed loan, the contract itself functions as collateral, which takes the element of risk off your shoulders. These loans are also designed to accommodate the unique challenges of construction projects, such as change orders, delays, and similar unforeseen circumstances. The interest rate and terms of the loan remain unchanged, providing greater stability and predictability for your business.
Purchase Order Financing
Purchase order financing provides funding to cover the costs of labor, materials, and supplies needed to fulfill a purchase order. It’s particularly useful if you’re a manufacturing contractor who faces substantial upfront costs before you can invoice your client.
This type of loan works for contractors in construction as well, and it is best for maintaining a steady cash flow and avoiding project delays. With purchase order financing, the amount of the loan is directly linked to the costs needed to fulfill an order, which in turn may be linked to a specific project (as is often the case). This allows for larger orders and projects to be taken on without experiencing severe cash shortages.
Work-in-Progress (WIP) Financing
WIP financing allows you to secure funds based on partially completed work. This type of financing ensures that you have the capital needed to complete a project without waiting for payments. It helps maintain momentum during projects without the fear of running out of funds midway through the work.
This is ideal if you’re a contractor who’s already undertaken a project and begun the work, but find yourself in a cash crunch. It can also work well for complex projects that are large in scope, or a series of smaller jobs that require the management of many moving parts. Having cash on hand ensures that every part of the project stays on track.
Alternative Financing For Contractors
While there are other forms of financing available to contractors, like factoring, daily debt loans, and lines of credit, they are less than ideal. Invoice factoring, for example, requires a contractor to sell outstanding invoices to a factoring company at a discount in exchange for immediate cash. While this may temporarily improve cash flow and speed up delayed payments, it requires you to sign over your invoices and accept an amount that is reduced from the agreed-upon rate. We’ve worked with contractors who have tried these alternatives in the past, and they realized just how much they were losing. Fortunately, our lending methods allow for low-cost repayment terms over a short period of time.
Get Financing For Contractors With Mobilization Funding
At Mobilization Funding, we want contractors to have the funds they need to succeed. Regardless of the size or structure of your contracting business, our financing solutions can help get you the cash you need quickly. Plus, you can see if you qualify for one of our financing options without putting any part of your business or personal finances at risk.
Here are all the advantages you get by working with Mobilization Funding:
- Simple, Straightforward Application - A member of our team will then walk you through every step of the process. Once the application has been filled out and submitted, we will execute the contract and fund your project in a “lock box” account just for your business. Even after the initial funding, we will continue to help you manage accounting until the contract is fulfilled, taking out any guesswork.
- Customized Financing Solutions - We offer a range of financing options, including contract-backed loans, purchase order financing, and work-in-progress financing. Each solution offers a high acceptance rate, competitive interest rates, and quick processing.
- Support From Our Expert Team - Our team of financing experts is here to guide you through the entire process — from your initial questions to the finalization of the contract and beyond. We’re committed to helping you succeed.
- Zero Impact on Personal Credit - Our loans are based on your project contracts and purchaser orders, not your personal credit score. This means you can secure the financing you need without risking your credit. It also means that, if your credit score is too low for a traditional loan, we can still find financing solutions for you.
- Flexible Repayment Terms - Our repayment schedules align with your project timelines. In other words, you don’t pay us until you get paid. This arrangement allows you to focus on completing the work, rather than worrying endlessly about cash flow hurdles.
Don’t let cash flow problems hold you back. With Mobilization Funding, you can secure the financing you need to take on new projects, grow your business, and achieve your goals. Contact us today to learn more about our financing options for contractors and get started on your path to success.