Financing Your Carpentry Business: A Guide to Business Loans for Carpenters
- Written by Daily Bulletin
Carpentry businesses tend to come with high costs.
After all, they typically work with expensive equipment and materials to carry out their services.
On top of that, the bigger your business grows, the more capital you’ll need to invest in more (and better) machinery and manpower to find success in the carpentry industry.
Small businesses could especially have a hard time with this.
So, if you need funding to expand your carpentry company, then why not consider business loans for carpenters?
What Are Business Loans for Carpenters and How Do They Work?
A business loan is a kind of commercial financing that you can get from traditional banks and alternative lenders, like Lumi Finance.
You can get the capital as a lump sum payment or a business line of credit.
You'll need to repay the loan (plus interest and other fees) according to how often your contract says you should — whether monthly, weekly, or even daily.
Small business loans can be secured or unsecured.
Usually, a secured loan offers lower interest rates and higher loans. However, you'll need to surrender an asset for collateral.
Meanwhile, unsecured loans don't need collateral. Instead, you'll need to sign a personal guarantee, giving you personal liability.
That means if the small business doesn't repay the debt, you'll have to pay interest and cover the rest of the costs through personal funds.
What Are the Benefits of Business Loans for Carpenters?
Carpentry businesses can benefit from business loans for carpenters in multiple ways, such as:
- Purchasing new equipment
- Repair and regular maintenance of equipment
- Hiring more manpower, such as many carpenters
- Providing good salaries, health insurance, and other health benefits to the team
- Creating a conducive environment that follows safety regulations
- Investing in other technological innovations to improve equipment and services
- Marketing to reach the target market
- Income protection by dealing with cash flow problems
To qualify for financing solutions, below are some requirements that potential lenders will most probably ask of carpentry businesses:
1. Personal Credit Score
Your personal credit score shows the lender your creditworthiness as a borrower.
Of course, the higher your score, the better.
2. Business Credit Score
A personal credit score shows your own ability to pay back loans. Meanwhile, a business credit score shows that your carpentry business doesn't have too much debt.
It also shows if you have any missed payments or if you've previously defaulted on anything.
3. Collateral
Not all business loans require collateral — which is any business asset that you surrender to a lender. You get the asset back once your business fully repays the loan.
If you don't repay, you'll lose ownership of the collateral.
Some small business lenders might ask for collateral, especially for a new business.
Collateral assures the lender that you'll repay the loan — or that they'll still get the money back by selling your collateral if you fail to pay.
Having collateral might also give you a higher loan.
4. Proof of Business History
You must show the lender that your company is established and operating successfully within the carpentry industry.
You can use a credit profile and bank records to prove this.
Aside from proving that your carpentry business has been operating for some time, it also shows that you're successful and profitable.
5. Business Plan
Of course, a lender will want to know how you plan to use the funding and how this will contribute to future profits.
Alternatively, you can just give a breakdown of how you plan to spend the capital on equipment or other services.
A marketing plan is also helpful in showing how you'll profit from the carpentry business loan.
You can find a good business plan template online according to your business structure to ensure you cover all bases.
6. Financial Documents
You should also present financial proof for any claims you make during the application process.
Other documents to pass include:
- Bank statements - These show in detail how you spend money. They also give the lender an idea of how your carpentry business invoices and how well you can get funds back from clients.
- Tax returns - These prove that you're a well-established carpentry business that meets all legal obligations of the place you operate in.
Frequently Asked Questions
Access to funding can be a huge boost in covering costs to improve equipment and customers' experiences with the company.
To further help you through the approval process of carpentry business loans, let's take a look at some frequently asked questions below:
Where Can You Get Business Loan for Carpenters?
Carpentry businesses can get funding from:
- Major financial institutions
- Government funding
- Alternative lenders
Interest rates, requirements, and how much your loan is will depend on where you access the funding and your financial situation.
How Long Will It Take to Get Business Loans for Carpenters?
How long it takes to access funding depends on the situation.
For instance, if you're approaching traditional lenders like banks, it might take weeks to get the capital.
However, alternative lenders like Lumi Finance can give funding faster. Admittedly, the interest rates might be slightly higher — but they're certainly more convenient for businesses.
Can I Get a Business Loan if I Have Bad Credit?
It depends on your situation. But in general, yes, you could potentially still get funding if you have bad credit.
However, the cost of getting a loan with bad credit is getting a higher interest rate and lower capital.
If your carpentry company has bad credit, it would be better to improve your credit first before applying for a loan. You can also turn to alternative lenders since they have more flexible requirements.
Conclusion
Running a carpentry business can be expensive.
After all, you need to keep purchasing better equipment and maintaining them. You also need good manpower and materials that can help you answer all your customers' unique needs.
As such, carpenters with businesses (especially small businesses) can turn to business financing solutions to cover the high cost of offering quality products and services.
Business loans for carpenters can help give a company run by a sole trader a competitive edge over other carpentry businesses in the industry.
Daily Bulletin
