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Position Your Construction Company for Financial Success

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GDP  growth in 2017 is expected to experience a cyclical rebound before returning to a rate more in line with long-term potential, according to economist Bill Conerly. In other words, some experts believe that real GDP growth in 2017 will outpace last year, but will stabilize in the years following. Is this good news for small construction companies?

Nonresidential construction growth is estimated by some to likely be at a slower pace, which Associated Builders and Contractors Chief Economist Anirban Basu predicts to be 3 percent to 4 percent. “Growth will continue to be led by privately financed projects, with commercial construction continuing to lead the way. Energy-related construction will become less of a drag in 2017, while public spending will continue to be lackluster,” Basu said.

In light of some of these encouraging estimates, it may be a good time for business owners to consider strategies to put their company in a position to take advantage of an upturn. They must be sure to have the skilled laborers in place to meet demand, as well as the other resources needed to take advantage of opportunities.

STRATEGIC PLANNING FOR 2017

Following are three ways contractors can take advantage of strategic opportunities this year.

1. IDENTIFY POTENTIAL CAPITAL NEEDS

Growth opportunities often come with a price; identifying them early enables business owners to plan for ways to cover those expenses. The tactics could include borrowing, saving or some combination of the two. Does borrowing to purchase equipment, inventory, or ramp up new employees make sense?  Because those needs are different, it might not make sense to assume a one-size-fits-all approach to financing, and time should be provided to explore all options.

A specified loan purpose will help determine how much capital a business owner will need, whether it makes sense to pursue financing, or the nature of the financing. For example, purchasing a new piece of construction equipment might be better suited for long-term financing than ramping up a new employee, which might not require any financing at all.

2. DETERMINE BORROWING ELIGIBILITY

Business owners must understand business and personal credit profiles. Along with the business profile, the owner’s personal credit score will be part of the equation when a potential lender evaluates the company’s creditworthiness.

Traditional lenders often use a business owner’s personal credit score as a go/no-go metric when considering business creditworthiness. For example, the local bank typically prefers a credit score of 700 or higher, but will sometimes go as low as 680. Anything less will likely result in a rejection. The Small Business Administration will go a little lower (650), but anything below that will become problematic for loan qualification. Yet, online lenders may dip below the 650 threshold if other healthy business metrics are in place.

3. DON’T DISMISS UNFAMILIAR OPTIONS

Access to capital is a challenge many small business owners face, and borrowed capital is a traditional source of capital to fuel growth and fund other ROI-generating initiatives. Many business owners are finding success with options like online business loans to fund those initiatives. If a business owner finds a lender he likes, he should check with the Better Business Bureau and other review sites to learn more about the company.

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