When a business wins a contract but lacks the funds to fulfill it, the most likely result is losing the contract. Since this is obviously something you want to avoid as a business owner, you might consider contract financing to obtain the funds necessary to fulfill the client contract.

What is Contract Financing?

Businesses that receive an advance on a recently awarded contract have completed this type of alternative financing. Having contract financing available as an option is especially important in the construction industry. The common practice in construction is for clients to make periodic payments throughout the project and settle any outstanding debt they owe upon project completion.

Examples of how your business might use this type of special financing include buying supplies and tools and running a project analysis before getting underway. Construction is a competitive business, which means that contractors who cannot buy supplies upfront so have no choice but to bill the client immediately are bound to lose business.

Applying for Financing

Clients who have an especially large project to complete might insist that the contractor they are considering show documentation to prove the company has the finances to complete all tasks. The last thing any client wants is for their project to stall due to a lack of funds on the part of the builder. If your business does not have the funds on hand, you may need to provide a letter of intent that indicates the company’s plan to obtain contract financing.

Here are the documents that lenders typically require when considering this type of business loan:

Business profile

Business credit report

Financial statements showing the ability to complete such a project

Reference letters from clients of previously completed projects  

Keep in mind that this type of financing is an unsecured loan, which means applicants do not put down any collateral. For this reason, you should be prepared to submit a decent amount of documentation.

Is contractor financing right for you? Achieve Capital Advisors would be happy to take your application and answer any additional questions you may have.