In the construction industry, raw materials, machinery and skilled labour can cost a lot. With insufficient funds on hand, the ability to swiftly secure a short term loan can be the difference between landing a lucrative contract and watching it slip away.
Besides closing the deal, construction projects run for an extensive period of time, suggesting the need for short term loans to finance the unexpected expenses incurred during construction. Short term business loans can be particularly useful if your business needs a quick injection of capital to navigate unforeseen fluctuations. Examples of short term loans include working capital loans and bridging loans offered by the government and traditional institutions.
Before we go into how a short term construction loan can help your company, let’s look at how a short term and long term loan differs.
Difference between Short Term Loan and Long Term Loan
Short term financing involves borrowing money that is repaid over a shorter loan tenure, typically one to two years or even as short as a few months. Such business loans in Singapore are commonly utilised to address immediate requirements like inventory purchases or cash flow fluctuations. Due to a shorter loan tenure and lower loan quantum, they do not require collateral and a near-perfect credit score, making it more accessible to SMEs.
In contrast, long-term financing has a longer loan tenure and entails repayment over multiple years. The period for repayment is significantly longer for long term loans, ranging up to 30 years. Businesses usually choose to finance big-ticket item purchases such as machinery and equipment with long term loans.
Depending on your business needs, traditional institutions offer both short and long term loans for businesses. However, businesses can also consider lending from private funders such as Poss Capital. Poss Capital provides quick and transparent short term business loan options where funds are disbursed to your SME business bank account in as quick as 24 hours from approval.
3 Ways a Short Term SME Loan Can Help Your Construction Business
A short term construction loan can bridge the gap between project outlays and client payments. This helps construction companies in Singapore maintain a healthy cash flow, ensuring they have the resources to cover ongoing expenses such as payroll and materials.
1. Cover Unexpected Expenses
Construction projects often involve many different costs. For example, to cover the procurement of essential equipment, project financing needs to be increased to support current and future construction projects. In other instances, finances might be affected by delayed payment by buyers. In this case, costs such as wages still need to be paid hence a cash flow crunch might arise. Short term loans thus come in handy to address cash flow difficulties. With better cash flow management, construction companies in Singapore can reduce the risk of delays caused by funding constraints.
Short term bridging loans also help to fill in cash flow gaps before permanent project financing kicks in. Together with business loans that Poss offers, construction companies can deliver the finished goods on time, satisfying customers.
2. Upskilling Manpower
Workplace safety and health management in the construction industry is especially crucial. All construction companies in Singapore need to ensure that their workers are well-trained to perform their jobs under safe and productive conditions. This would require training to maximise the competency of existing employees. The Ministry of Manpower has also lowered levies of higher skilled workers to incentivise employers to send their employees for skills upgrading.
The initial capital required to upskill your workers from “Basic-Skilled” to “Higher-Skilled” can be high. Short-term business loans can provide the necessary funds to invest in training immediately. Your construction company can then benefit from skilled workers and levy reductions sooner. A short term construction loan can help cover these necessary upskilling costs, upgrading your worker’s capabilities to take on new types of projects.
3. Seize New Business Opportunities
Access to short term business loans in Singapore allows a more flexible cash flow where financial resources can be accessed easily. With the working capital available, construction companies can take advantage of bulk purchasing discounts, reducing overall project costs. With the reduced costs on materials, your company’s profit margin is higher, contributing to increased profitability. The financial stability that comes with flexible cash flows also allows your business to submit more competitive bids without compromising on quality or project timelines.
A short term construction loan also enhances your company’s ability to take on larger, more lucrative projects where down payments are needed. With the ability to pay down payments which would have been impossible without a loan, businesses can achieve their goal of business growth and increased profitability.
Did you know that the Singapore government also offers financial assistance to SMEs? An example of a SME government grant would be the Enterprise Financing Scheme. However, the loan quantum provided by SME funding in Singapore may not be adequate to support the development of businesses. Also, these loans are long term loans that may not be able to address urgent cash flow concerns. Hence, a short term loan comes into the picture to further help your SME realise your goals.
Nevertheless, all business loans have risk hence it is of utmost importance that your business has a sound financial plan before committing to any loan or construction project. With proper consideration for the feasibility of loans, short term loans can be very helpful.
Transform Your Construction Company with Poss Capital
All in all, short term business loans offer a flexible and efficient way to manage your construction company’s cash flow to take advantage of new business opportunities. By understanding how short term loans can benefit your construction business in Singapore, you can make informed decisions and grow your business.
At Poss Capital, we offer tailored short term business loans with a loan quantum of up to S$100,000, for up to 12 months. With no collateral required and transparent fees, you can be assured of no surprises and a Quik way to access funds. Contact us today to learn more and take the first step towards boosting your business growth.
