The construction industry is one of the biggest industries out there. According to the United States Census Bureau, the total value of the construction industry, in millions of dollars is 943,139. Additional statistics show that as time goes by, the value of each construction project (such as a house) increases. This means that the industry value increases as well. Clearly, the construction industry is a very lucrative industry to be in, but all subcontractors also know that being in the construction industry is tough.
Aside from facing stiff competition from other subcontractors and rising cost of raw materials, the projects are usually high value and take months to complete. Winning a contract means a great deal. In contrast, losing out on a contract bidding and not getting the next project of your current customer could mean a lot in terms of opportunity lost. The construction industry operates differently, and there are many financial challenges that they face. This is why sub-contractor business loans are available.
Special needs of subcontractors
A subcontractor faces additional challenges because of the nature of the industry and the nature of their role. These are some of the special needs that make being a subcontractor extra difficult:
1. Amount of Working Capital Needed
When you’re a subcontractor, you need to advance a huge amount of money to move the construction project. If you’re constructing a building for instance, the project won’t materialize unless you put in the needed working capital to buy the raw materials, pay for the labor, and fund all the expenses related to the project. This means the working capital you need at any give time far exceeds the usual working capital needed by other types of businesses.
2. Unique Timelines
In many cases, the client will only pay a subcontractor in full once the project is completed. This becomes a problem because you won’t have enough money to pay for your day to day expenses in the mean time. It’s a chicken-and-egg situation, because you can’t exactly wait for another contract to be completed just so you can start on a new one. If you want to really grow your business, you need to turn to financing and this is why Sub-contractor business loans exist.
3. Other Players to Consider
If you’re a subcontractor, you’re also usually not paid until the client pays the general contractor. This adds another layer of complication, because it means you’re not only relying on just one player. In addition to the actual client, you also need to think about the schedule and timelines of your general contractor.
Providing subcontractors with flexibility
If you operate in the construction industry, you would know how difficult it is to be limited with the amount of working capital you have. It’s difficult to grow, and even more difficult to succeed when you don’t have enough funding. With subcontractor business loans however, you are given maximum flexibility and freedom to utilize the funds as needed, which is important in your line of business.