If your business needs money for a future project, consider obtaining contract financing. This is a form of collateral that you have with a lender. However, the agreement is between the lender and the customer you are doing construction work for. As a result, their credit is scrutinized when you apply for contract financing to complete a project for them.

The Process of Contract Financing

This type of financing is based on the value of the contract signed by your customer. The amount of the loan is worth will always be close to the total cost of the project. In most cases, payments are made after each step in the process.

However, your customer must meet certain requirements in order to qualify for contract financing in the first place. It is most often used when a company’s credit rating is not high enough. As long as the customer has a high credit rating they can probably get this type of funding. However, even without that obtaining contract financing may be possible.

It will often get approved if there is a valid contract stating payments will be made based on milestone accomplishments throughout the construction process. When your business has a positive track record it is easier to get contract financing than it would be otherwise.

Ways to Qualify for Contract Financing

There are a few qualifications that, if they are met, will result in the approval of this type of loan. One of the qualifications is having been in business long enough to be well established. As long as your business has a clean record and no history of defaults on loans or lawsuits, this is an excellent way to fund a construction process.

Monthly billing amounts are also taken into consideration. Chances are you will have to submit proof of your revenues each month. These revenues must be high enough that you can afford to pay back the advanced money. The higher your revenues are the more the loan will be worth.

You’ll find that contract financing usually comes from private firms.

For more information on contract financing please contact Rushview Commercial Funding.