In August 2015, the U.S. Census Bureau reported the highest level of annual construction spending since May 2008 at a seasonally adjusted annual rate of $1.09 trillion – that’s 13.7% more than August 2014. As a result, many contractors are experiencing competitive interest rates at historical lows as well as favorable advance rates.

Although contractors that have benefitted from the economic rebound are likely not concerned with credit availability, this is the best time for them to assess their standings and prepare for the next downturn.

To mitigate risk related to your company’s credit availability, it’s critical to understand how lenders evaluate your business and make decisions. This article will cover how to retain access to credit regardless of the economic or industry environment.

Points of View

A common disconnect exists between contractors and lenders in how each party thinks about a loan. Consider a contractor that purchases a crane for $500,000 and is looking for 80% financing; assume a five-year loan at 4% interest rate and a five-year amortization. From a contractor’s perspective, this equipment is needed for operations (i.e., new projects or cost savings) and is a solid investment that will also retain residual value.