We often hear from smaller construction companies looking for loan quotes for working capital to finish off a project, buy a fixer-upper to flip or buy a site for a small development. There is a gap in the market for financing everyday builders whose deal size falls short from what many lenders are willng to finance. Most lenders ideal entry-level client is looking for €500k to €1 million, as well as having a development in a town with a population over 10,000. One reason is due to the set fees for professionals such as lawyers, who can charge the same for a €200k deal as they would a €2 million deal, making small deals unattractive and so have a lower rate of offer acceptance. Another issue is protection from shocks to the economy. The more rural the development the more likely a chance of a significant drop in value, potentially leaving the lender exposed to losses.
Other times we hear from builders who have been self-financing a project but run out of cash. The collateral so, is an unfinished build and this can be challenging for lenders to want to use to lend against, in case they are left on the hook if the project runs in to problems affecting repayment. So what options are there for construction companies financing lower end deals?
Simple unsecured loans
One option, if the company is generally profitable and the bank statements can show affordability for repayments is an unsecured loan up to €250k with a non-bank lender. Because it’s unsecured the lender is not as concerned with the project and collateral. They’re really relying on your track record and operation of the bank account.
Bridging loans
While in the example above with a builder wishing to use an unfinished or rural site as collateral to get development finance, often when you dig a little deeper this project might not be the only collateral available. It’s easier to use collateral of more attractive rental properties and get a bridging loan. Deals from €150k and upwards can work. These funds can then be used for the riskier project then lender otherwise would not have financed.
Invoice finance
If you’re working on commercial projects with reputable companies and due stage payments there are flexible invoice finance options that enable you to access most of the working capital on raising your invoice. You then get a final settlement with the debtor pays.
If you’re a property developer and need financing we have a wide range of contacts in pillar banks, non-banks and even high net worths who may be able to finance your project. BusinessLoans.ie is here to help 7 days. Email us at hello@businessloans.ie or call 01 55 636 55.