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Types of Finance for Your Construction Business
Unsecured Business Loans
Unsecured business loans don’t require collateral, but they typically have higher interest rates than secured loans due to the increased risk to the lender. This also means you can’t borrow as much as you can with a secured loan, but you can still access a substantial amount of credit. Unsecured loans are ideal for construction businesses that lack valuable assets to offer as security or that choose not to use them as collateral. They are equally as versatile as secured loans, meaning they can be used for anything business related. The loan amounts usually range from £1,000 to £500,000 and can be repaid over a maximum period of six years.
Revolving Credit Facility
Revolving credit facilities offer construction businesses a flexible credit line that functions similarly to an overdraft. This funding option can be beneficial for construction businesses that require a financial cushion for unexpected expenses or cash flow challenges. Revolving credit facilities usually have loan amounts ranging from £10,000 to £2 million and can be borrowed over a two-year period. The available credit decreases as more funds are borrowed, but once the borrowed amount is repaid, the original amount becomes available again and can be used repeatedly as needed. This can be ideal if you unexpectedly need to borrow money to replace equipment, for example, as you don’t need to apply for new credit each time.
Recovery loans are a financing option that can assist construction businesses in overcoming financial difficulties. This type of borrowing is suitable for businesses that have encountered financial setbacks and require a larger sum of money to move forward. The loan amounts usually range from £25,000 to £2 million and can be borrowed over a maximum period of six years.
When it comes time to purchase new equipment or assets, but you don’t want to impede your cash flow or don’t have the necessary funds immediately available, an asset finance agreement could be for you. This allows SMEs to use business assets as a way to secure finance and facilitate growth. Usually, it refers to assets such as equipment and machinery; for instance, if you run a plant hire company and want to purchase a new vehicle, but you don’t have the cash readily available, you can take out asset finance in order to make the purchase. You can also use asset finance to refinance assets your company already owns – however, there are eligibility criteria regarding the age and condition of equipment that can be refinanced.
Using Finance for Construction Equipment
Asset finance is an ideal option for businesses looking to expand. An asset finance agreement allows you to purchase new assets – usually equipment or machinery, but sometimes also ‘soft’ assets like intellectual property – if your company doesn’t have the funds immediately available to do so. In this way, your company is able to purchase the assets (a new bulldozer or excavator, say) required to ensure future growth.
On the other hand, unsecured loans are an option for businesses that don’t have valuable assets to offer as collateral. While unsecured loans come with higher interest rates than secured loans, they are easier to obtain and don’t require the borrower to provide any collateral. Unsecured loans are suitable for businesses that need to finance smaller equipment purchases, such as tools or vehicles, and are looking for a quick and easy financing solution.
Careful consideration should be given to the type of financing option that best suits your business needs, taking into account the size of the purchase, available assets, and the urgency of the equipment. If you’re unsure what type of construction finance is most suitable for buying equipment, speak to one of our team members today.
Key benefits of working with Aurora Capital
LendTech Technology - Access to 50+ Lenders
Apply Online in Minutes & Get Funding in Days
No Effect on Your Credit Score
What are the Requirements to Secure a Business Loan for Your Construction Business?
We do have some products for new businesses that haven’t been trading for six months, so don’t hesitate to reach out if this applies to you.
What is the Application Process to Secure Funds?
At Aurora Capital, the application process for construction finance is straightforward. When you know what type of funding is best for you, you can apply online. Filling out the form only takes a few minutes, and the application has no impact on your credit score. When your application is in, we will expertly match you with lenders with the most competitive terms. It takes just days to process the paperwork, and funds can be in your account in less than a week.
This being said, depending on the type of finance you’re opting for, there may be a few additional steps to consider, and some general know-how about what lenders will expect to evaluate when assessing your application. Some of the main things to keep in mind and be prepared for include:
- A Clear Requirement for Funding: If you’re taking out a large sum of credit, many lenders will want to understand how you are going to utilise this in the business. It’s always good to have a breakdown of what you are intending to use the funds for.
- Credit History: Your credit history will almost certainly be assessed so lenders can get a feel for your reliability and affordability. If you have an adverse credit history, some lenders may still work with you, so don’t hesitate to submit an application – applying through Aurora Capital has no effect on your credit history.
- Collateral: For larger credit amounts, it’s likely lenders will want to secure the loan against collateral, so they may assess what assets you have, their value, and whether they could be used to recover funds if needed.
If you have any questions about the application process, speak to a member of our team today.
Mistakes to Avoid During the Application Process
Generally speaking, applying for construction credit is easy with Aurora Capital, but there are some general best practices to keep in mind:
- Only borrow what you need – A lot of businesses go wrong when they ask to borrow more money than they need. It’s easier to get approval to borrow smaller sums of money and keep adding to it, especially if your credit history isn’t great. Only apply for what you need, and no more.
- Prepare your paperwork – Make sure you have your accounts information and a business plan ready to go should a lender ask for it. This will speed up the application process.
- Assess future affordability – When choosing a finance product, assess the repayment terms thoroughly. If monthly repayments are high, will you be able to keep up with them if your business experiences a quiet period?
We can guide you through the application process and help you prepare. Speak to one of our brokers to find out more.
Construction Funding FAQs
How much can I borrow for my construction business?
The amount you can borrow will depend on a number of factors, including your credit history, your annual turnover, your monthly overheads and affordability, how long your credit terms are, and the type of finance you opt for. At Aurora Capital, we generally work with businesses that need to borrow in the region of £10k to £500k.
What are the benefits of taking out a business loan for a construction company?
Many businesses rely on external funding to help them grow and thrive, and construction companies are no different. When you take out a business loan, you can plug temporary cash flow gaps, keep your operations going as normal, invest in new equipment and staff to take on more projects, and increase the reach of your business overall.
Why choose Aurora Capital as your online lender for your construction finance?
As a construction company, you need access to flexible funding options to fuel your growth and take on new projects. At Aurora Capital, we understand your needs and have partnered with over 50 lenders to provide you with a diverse range of financing solutions.
Our streamlined application process is quick and easy, taking just a few minutes to complete. Plus, our applications have no impact on your credit score. With our fast decision-making process, you’ll receive an offer in just a few days and funds can be available in less than a week.
As experts in construction financing and with a commitment to exceptional customer service, we are a trusted partner for construction businesses looking to achieve their growth goals. Partner with Aurora Capital today and take your business to the next level.
We cover a multitude of finance options.
Aurora Capital is here to help. Navigate our range of alternative funding options to find out more.
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Prefer to talk? Call us on 020 3355 7462