Construction Business Loans: A Guide in the USA

Now more than ever, small business construction loans could prove the vital source of cash required by many smaller construction firms who operated as part of the $1.31 trillion valued US construction industry in 2019. 2020 will see a certain reduction in output but post COVID-19 forecasts still predict steady and continuous growth in the US construction industry from 2021-2023. Construction firms who can continue trading, perhaps through the benefits of commercial construction loans, will be best placed to take advantage of this growth in a climate that is sure to see a fall in competition. Read on for our full guide to construction business loans, the best construction loan lenders and alternative, easier to achieve funding options, such as construction equipment financing.

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Our Recommended Providers for Commercial Construction Loans

When looking to apply for a small business construction loan online your business has two options – apply to an online lender directly or utilize an online lending marketplace to let them do the hard work and compare a number of different financing options for your construction business.



Fundbox is one of the most established small business lenders in the US and they offer credit to businesses in need of construction funding. Funxbox is a direct lender and can establish either a line of credit or construction invoice factoring facility to give construction companies quick access to capital.


With advanced algorithms and its unique LendingScore™ dashboard that provides tailored guidance, Become helps companies of all ages and sizes, including construction companies, get funded. By breaking the norms of the traditional loan application process Become improves the chances of obtaining business loans for construction companies.

Why Seek a Construction Business Loan?

Purchase materials and equipment

Funds from a construction loan can be used to buy raw materials and the building equipment that will be used in the construction of a new property.

Expand existing company facilities

If you’re a small business owner with a physical location and you’re looking to expand your premises, perhaps build a new office or renovate an existing one, then you can use business construction loans to finance your project.

Unexpected and repair expenses

Perhaps you’re waiting for an outstanding invoice to be paid, a key piece of your equipment has broken or your commercial property has been damaged by unforeseen circumstances such as a natural disaster. Your business can utilize construction loans to make the necessary repairs.


Construction may be your profession but if you require expert assistance in other areas such as accounting or marketing then you can use construction business loans to make outsourcing more affordable.

Growing and training your team

You can use the funds from small business construction loans to hire new staff involved with the construction project. You can also utilize the funds against education and training costs for those employees.

What are Construction Business Loans?

Construction Business Loans

For individuals looking to get stuck into a construction project you can find a number of construction specific lending products available from high-street banks. New construction loans designed to help people build a house, renovation construction loans to encompass all costs involved in upgrading a property and construction-to-permanent loans which see your construction loan converted into a mortgage upon completion of a property.

Traditional commercial construction loans are usually structured in a way that the lender pays a percentage of the completion costs and the builder or developer pays the rest. The lender will release funds in a series of payments throughout the construction process. The lender is likely to require an inspection throughout the construction lifecycle  to ensure that the project is proceeding as planned and the next stage of capital can be released. When taking construction business loans like this it’s important that each stage of funding is clearly defined so you know exactly when, upon completing certain targets, you’ll be due your next injection of cash. Generally, construction loans of this nature have shorter terms as they reflect the amount of time it takes for the construction project to complete – a twelve-month term is quite common.

The truth for businesses however is that most construction business loans work much in the same way as they do for other industries. This is especially true with the rise of online business loan companies that provide multi-purpose working capital loans. This is because the specific purposes that construction firms seek small business construction loans often fall under the general lending purposes defined under working capital loans. Whether that is to pay staff, fix machinery, or to purchase raw materials.

Unique innovators in the lending market and wider adoption of technology has also made it possible for small construction companies to benefit from the same construction business loans that large construction firms have traditionally only been able to access. Construction invoice factoring and construction equipment financing are two great examples of this. Again, both of these lending solutions work in a number of other industries but the nature of construction cycles and the seasonality involved in the construction industry make these lending solutions particularly relevant for construction firms. We’ll discuss both in more detail later below.

Qualifying for Business Construction Loans

Commercial construction loans can be quite difficult to receive approval for when you are applying through traditional US banks. As with most bank loans, the process of getting a loan through a bank is complicated by the bureaucratic hurdles and red tape that soon makes the whole process too time-consuming. If you apply for a loan through a bank, your credit score will also be negatively impacted.

Lenders each have their own lending framework for what they consider to qualify you for a loan, but generally, you should have a credit score in the high 600s, a low debt-to-income ratio, and details about the project you want to borrow money for.

Qualifying for a small business construction loan is made easier if you utilize online lending marketplaces, such as Become. Businesses such as Become and other newly launched marketplaces work hard to improve your chances of getting approved for construction business financing by working with a number of lenders on your behalf. Having more familiarity with each lender’s framework and the criteria for issuing construction business loans means companies like Become can steer your construction business in the right direction. In the event that your business doesn’t qualify, then you’ll be given guidance on how to increase your funding chances.

Financing Alternatives to Traditional Small Business Construction Loans

Unsecured Business Loan

If your construction company has sound cash flow and a good credit score then an unsecured small business loan will offer some of the best terms available. As an unsecured business loan, it won’t require any form of collateral and the loan provider is taking on most of the risk. Unsecured business loans can generally be used for any working capital purposes deemed fit by your business so they can be very versatile and processed in a matter of a few days. The drawback is that often unsecured business loans are aimed at shorter-term borrowing thus now allowing sufficient time for project completion but you will find some providers happy to extend credit for up to 18-24 months.

Construction Equipment Financing

Having the right equipment is vital for all construction businesses and your business may regularly have to buy or repair existing equipment. With equipment financing, the lender provides you with the sum that the equipment costs. The equipment itself then serves as the collateral needed for the loan. So rather than having to provide existing business assets as collateral, the new piece of equipment you’re purchasing can do this instead.

Construction Invoice Factoring

Construction factoring is a very legitimate financing option for businesses in the construction industry. If you often find yourself unable to move onto the next project because of slow-paying clients then construction invoice factoring could be exactly what you’re looking for. Construction invoice factoring companies will advance roughly 80% of the value of your unpaid invoices, collect payment from your customer when your payment terms are up, and forward you the remaining value of the invoice (less their lending fees).

Given the slower payment terms involved in construction, this solution can be particularly beneficial for cash flow, freeing up funds to pay staff and involve your business in a greater number of projects. Using your unpaid invoices as collateral also means you don’t have to provide any of your physical assets

Business Line of Credit

The key feature of a business line of credit is that it works in much the same way as an overdraft. As the construction industry can often be prone to changes, a construction business owner can rely on a construction line of credit to provide the flexibility to borrow as much as needed exactly when it is required. The line of credit provides the total sum a business can borrow and the borrower is free to draw on those funds as many times as required up to the total value of the line of credit.

The size of the line of credit will be based on the market value, profitability, and risk taken on by your construction company – all of which are determined by the loan provider.

SBA Loans

Whilst it’s important to remember construction business loans are not provided by the SBA themselves, construction absolutely falls under the legitimate purposes that businesses can apply for an SBA loan guarantee. The most popular SBA 7a loans are often used for construction, whilst SBA 504 loans are solely for construction and development purposes. As the SBA secures the loan on your behalf and caps the rate that loan providers are allowed to charge, these loans will always present fantastic value but construction firms should be aware the process can take many weeks.

As we have already mentioned, these alternative financing options are available to businesses in all industries and are not necessarily construction-specific. That’s why you’ll see some of the most established online lenders refer to these as ‘Kabbage Funding’s loans for construction companies’ or Fundbox’s ‘financing alternative to construction loans’. Both companies offer a line of credit whilst Fundbox also offers construction invoice factoring via its ‘Fundbox Net Terms’ solution.

Final Word on Construction Business Loans

For the US firms who operate in the construction industry, it is of vital importance to keep consistent cash flow throughout a construction project. Even the most careful pre-planning of man-hours, equipment, and material costs can still result in going over budget. Particularly when unforeseen circumstances come your way.

The ability to finish a project is crucial so commercial construction loans can be of a huge benefit in maintaining cash flow throughout a project and sustaining your business in difficult downturns. For many construction firms it’s difficult to obtain dedicated construction business loans so it might be right to consider alternative forms of construction financing such as unsecured business loans or construction equipment financing. If you have a number of unpaid invoices from previous construction projects then construction invoice factoring can generate immediate cash flow.