construction business

Best Construction Business Loans for 2022

Obtaining small business loans to start your construction business can be challenging, especially when you need massive capital investment. In this guide, we’ll investigate how to find the best construction business loans, which types you’ll need, and our recommended lenders.

At a glance Navigating the different types of loans on the market is not an easy task. Especially as there are so many stipulations and loan terms to work through and understand. Our experts are here to shed light on this process. In this thorough guide, our experts will walk through which construction business loans are the best, which lenders are available, and the standard loan features.  

What Is a Construction Business Loan?

To begin with, it is essential that we define what we mean when we refer to construction business loans. You will want to explore commercial mortgages if you are a business person wanting to build, buy, remodel, expand, or refinance the property for your business. On this page, we are referring to a different kind of loan type.

Here we are talking about construction business loans, specifically geared towards construction companies that are doing the expanding, remodeling, and building. 

A construction business loan is any type of loan that goes towards funding a business in the area of construction. There are many types of construction business loans including term loans, lines of credit, equipment financing, and business credit cards. 

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Best Construction Business Loans - A Quick Overview

Let’s look at the financing options available to you. You don’t have to focus on one, as you can go the flexible route and choose two or more loans that suit your needs. We’ve also indicated which lenders are ideal for each type of loan.

Financing Need

Best Loan Type

Loan Features 

Recommended Lender

Project financing

Commercial mortgage

  • Amount: Up to $2 mil
  • Term: Varies per project
  • Interest: From 6% and up
  • Time to get the loan: Up to 2 weeks

PayPal Working Capital


Equipment financing

  • Amount: 100% value of equipment
  • Term: Up to 6 years
  • Interest: Between 4% and 40%
  • Time to get the loan: Up to 48 hours 


Capital outlay

SBA loan

  • Amount: Up to $5 mil
  • Term: Up to 25 years
  • Interest: From 6% and up
  • Time to get the loan: Up to 2 weeks


Supplemental purchases

Business line of credit

  • Amount: Up to $500,000
  • Term: Up to 18 months
  • Interest: Between 7% and 25%
  • Time to get the loan: Up to 24 hours


Cash flow

Invoice factoring

  • Amount: Up to 100% of the invoice value
  • Term: When the client pays
  • Factor fee: 1% - 3%
  • Time to get the loan: Up to 24 hours


Insurance payments, inventory replacements, raw material purchases, equipment investment, vehicles, salaries, and other monthly expenses

Short-term loans

  • Amount: Up to 500,000
  • Term: Up to 15 months
  • Interest: One-time factor rate 
  • Time to get the loan: Up to 24 hours

Fora Financial

Construction Business Loans Explained

Now that you’ve seen the funding options available for construction business loans, it’s time to delve deeper into the specifics of each loan.  

1. PayPal - Best for Commercial Mortgage

If there is a building or renovation project that you want to undertake and you don’t have the initial funding to get you started, you may wish to  apply for a commercial mortgage. Typically, once you reach your first milestone, and receive your first payment from your client, you will need to repay a portion of the construction loan before you can receive more funds. In this way, if your project stalls or stops, both you and the lender are protected.

You will only receive payment from certain construction contracts once you reach specific milestones. Commercial mortgage loans can help you cover the expenses of your first few client contracts until you have enough funds to cover the contracts yourself. However, lenders will generally only pay you a certain percentage of the total loan amount per project deliverable. You may wish to use your client’s income installments to cover the interest payments. 

PayPal Working Capital has a unique platform that lets you develop your loan online. You can play with several options until the funding terms suit your business plan. Furthermore, PayPal will allow you to borrow up to $500,000 without early repayment fees.


2. Fundera - Best for Equipment Financing

Equipment financing can help you purchase equipment for your new construction business. You can receive up to 100% of the funds upfront to buy all the machinery and tools you need and you will likely be granted a generous repayment period. However, there are cases where lenders may ask for a down payment, or they may take your assets if you fail to pay.

Before you even find your first client, you’re going to need vehicles, machinery, tools, and equipment. When a client appoints a contractor, they want to see your assets portfolio to see if you can cope with the workload. Some construction contracts will have specific requirements for how many trucks and tools you will need for a project.

Fundera specializes in equipment financing. This loan provider is also willing to work with new companies that have no former experience or track record. It has an excellent reputation for being transparent, and it works closely with its clients. 

3. SmartBiz - Best for SBA Loan

Small Business Administration (SBA) loans have government backing for financial approval. You can only obtain this funding through approved lenders, with the government guaranteeing 85% of the total loan amount. You’ll find that SBA loans have competitive rates and low monthly repayments.

SBA loans can provide you with the working capital you will need for the first year. You can use it to purchase land, equipment, vehicles, and machinery. Of course, you’ll need to ensure that you apply for the correct SBA loan category.

SmartBiz is an approved SBA lender with sufficient industry knowledge to guide you on the loan options that will suit you best. It has better repayment terms and rates than most of its competitors. The turnaround time for approvals is fast, so you’ll have quick access to your funds.

4. BlueVine - Best for Business Line of Credit

When working on a construction project you may need to make daily purchases. You may also need to deal with emergencies. At times you won’t want to use your capital or operating budgets to deal with emergency costs or daily payments. A business line of credits acts as revolving credit, providing you with funds you require when you need it, and you will only pay interest on what you draw.

Generally construction projects require additional purchases during a project’s lifespan. Given that you’ll only receive income after specific milestones, it’ll be handy to have a constant funding source when things go wrong. You can also use a business line of credit to repair or replace broken machinery and equipment.

BlueVine is our recommended lender for business line of credit for construction business loans. BlueVine approves finances quickly, giving you access to your funds at all times. You can also manage the remaining repayments and credit via the client portal.

5. Fundbox - Best for Invoice Factoring

Invoice financing is where a lender buys your outstanding invoices and takes a percentage from the income, as payment, once your customers pay. Invoice factoring is helpful when there are long payment clauses and you need cash flow for the month ahead. With invoice factoring, you won’t have long repayment periods or high-interest rates to worry about.

Many construction contracts have long payment periods, generally between 30 and 45 days. They also have workers and utilities to take care of. Invoice factoring can provide you with access to funds while you wait to receive your payments.

Fundbox offers loans based on your existing invoices. Fundbox distributes funds quickly. You also don’t need a high credit score to qualify.

6. Fora Financial - Short-term Loans

Business owners looking to give their companies a financial injection through a loan that can be easily repaid usually turn to short-term loans. They are much easier to get and repay with as little fuss as possible.

Fora Financial is recommended to any construction business that needs to pay for any raw material purchases, investment in new equipment, or miscellaneous monthly expenses. Fora offers flexible payments on loans between $5,000 and $500,000.

There is no need to have any collateral to qualify for a loan from Fora Financial and quick repayments get rewarded with discounts. Applicants do not have to wait weeks to find out if their loan was approved - this is typically taken care of within 24 hours. Upon approval, Fora will pay the loan amount into the company’s bank account in three days.

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How Much Does it Cost to Open a Construction Business?

It’s undeniable that starting a construction business requires a significant pool of capital funds. To begin with, you will need a site to keep all your equipment and assets, including vehicles and tools. Let’s take a look at some of the costs involved with opening an actual construction business (we haven’t taken project-specific costs into account). 

Of course, you will also need to factor in the labor costs, including workers and site and project managers. On occasion, you may also need to outsource engineering and architectural services for building and designing. 

There are some abstract fees that some small businesses overlook when applying for construction business loans. For instance, asset insurance, workers’ liability, and permits per site are all factors that can impact your costs. Utilities and rental are other aspects that you may need to take into consideration when forming your business plan

Here’s a quick overview of what you might use your loan for:

  • Raw materials and inventory
  • Vehicles and equipment
  • Employees and related overheads
  • Facilities management (cleaning, sewerage, security, maintenance)
  • Insurance
  • Registration, permit, and license fees
  • Miscellaneous expenses (utilities, rent, short-term outsourcing)

When starting a construction business you’re looking at between $100,000 and $500,000 just to get started. This doesn’t include what you will need to add - per project - before you receive the first payment.

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How to Choose the Best Construction Business Loans

As you can see, there are different repayment terms and interest rates for various construction business loans. Choosing the right loan for your company is essential. You will need to present the lender you approach with a solid business plan as, in most cases, the recommended lenders will use this to guide you towards the loan type that best suits your business needs.

You’ll need to assess which loan option best meets your requirements. Sometimes, you will find one loan that will cover your capital, operating, and daily expenses needs. In other cases, you may need to choose a few loan types to meet different business needs.

Have a look at how flexible the loan types are before applying for one. Consider the following:

Can you use the loan for various elements, or does it only cover assets? Does the loan make provision for wages and inventory purchases, or can you only use it as a long-term plan? Finally, it’s essential to see how quickly you’ll receive the funds after approval.

See Our Additional Guides on Industry-Specific Loans

Bottom Line

Obtaining construction business loans isn’t always easy, especially as you will likely need to borrow a large sum to get your construction business off the ground. It’s best to know exactly where your business is heading before you start applying for loans, so that you get the right loan for your requirements. This guide has provided you with insight into the world of funding and construction business loans. Now it’s time for you to consider your options and get down to business - you can start by drafting your business plan and researching each recommended lender further.