A contractor may only grow to a certain extent without using an external source of financing (ESF) due to limitations to their target market and prospects. Every now and again, I interact with a contractor that either does not use an ESF or has little to no experience working with a lender. I find that reluctance may be based on a variety of factors, including controllability, fees, and the capacity to manage.
A reliable financial plan is an archetype of a company’s goals for the future. There are various factors and business operations that affect financial plans and stability; however, most financial variables can be projected based on the sales numbers of previous years. When sales numbers begin to increase, the need to effectively use an ESF also increases in order to achieve sustainable growth. Working with a lender can help reduce financial leverage and facilitate the capitalization of internal financials towards other business operations.
Once you have made the decision to use external sources for financing projects, it is necessary to understand the programs and process of your financial provider and receive training to work efficiently with your ESF.
Here’s a quick guide to understand what type of lender might suit your needs best.