From extravagant tables and flooring to art pieces and the frames of houses, there is no shortage of purposes for wood. Throughout history, this material has made its inherent worth clear by the work product of carpenters worldwide. This value comes with a high cost of business for carpenters — especially when you think about the price of polishers, sanders, and other woodworking tools. However, these tools are a worthy investment since, without them, a carpentry company won’t be able to meet the ever-adapting demands of the industry.
Instead of risking the loss of customers, carpenters can invest in better machinery and more labour in order to gain a competitive edge in the marketplace. Even with ongoing contracts, it can take quite a while for carpenters to pay off the value of the loan — particularly when you consider the high price of the machinery itself. In order to pay for the equipment in a responsible way, many carpenters opt to get a business loan.
Expenses Business Loans Can Help Your Carpentry Business With
With the high costs associated with both opening and running a carpentry business, getting a loan can offer many benefits. It can address the specific stresses placed on carpenters and make it easier to establish the business; to give it a foothold in the industry and enable the carpentry company to thrive long-term. There are many approaches to using a carpentry business loan, including:
Carpentry is a very equipment-reliant business, especially when you think about the sheer demand for tools. From sanders to spinners to polishers, there is no shortage of need for equipment. A loan can be used to either replace damaged equipment, which could result in workplace safety issues or to simply upgrade the tools in the workplace.
Investing in New Technology
In order to remain competitive, companies must keep up with the times. This involves investing in new equipment, software, and technologies that you can leverage into an increased market share.
Hiring Additional Employees
The cost of human labour is high; however, without an ample supply of this manpower, a carpentry company will be unable to complete contracts in a reasonable amount of time. Especially if the business seeks to set itself apart through efficiency, having enough workers is essential.
In order to keep your employees happy and working hard, the funds from your business loan can help provide health insurance and other benefits to your team. This incentivizes employees to continue working for your company, improving your staff retention and overall morale in the workplace.
Where Can You Get a Business Loan For Your Carpentry Business
There are several approaches to getting a carpentry business, each offering a different set of benefits. Finding the right resources is essential to getting funding that suits your business needs. Potential lenders include:
Banks: Major financial institutions have strict lending standards. As a result, it can be more difficult for carpentry businesses to access business financing. This is especially true for new companies or those run by an individual with poor credit. However, for established companies with a proven track record and good credit, banks are a good loan source because of the more affordable rates.
Alternative Lenders: These private lending companies make it easier to access loans for younger companies and those with less-established credit. While the interest rates can be higher, the lending standards are substantially more flexible. Additionally, the loan applications are digital and efficient, letting you access funds quickly.
Government Funding: Another way to get funding for your carpentry business is through the Canada Small Business Financing Program (CSBFP). This program offers loans as high as $350,000 which can be used toward the purchase of tools and equipment, the improvement of machinery, and other uses like leasing real property.
What Do You Need to Get a Business Loan For Your Carpentry Business
In order to qualify for and access the right business loan for your carpentry business, there are several things you will need. These include:
Personal Credit Score
You will need to provide the lender with information related to your credit file. This informs the lender about your creditworthiness as a borrower by highlighting your credit track record. Naturally, a higher credit score makes you a more desirable borrower.
Business Credit Score
In addition to your personal credit score, you will need to supply a credit report for your business. While the former showcases your ability to repay the loan as an individual, the latter highlights the business’ history. It shows that you are an established company that doesn’t have too much debt and will be able to make your regular payments.
Another factor you should consider is offering collateral, property which you can leverage to gain access to a loan, to improve your chances. In the event of default, this collateral secures the loan, meaning it would be seized if you could not repay the amount. Collateral ranges from equipment to real property, depending on the size of the business.
You will need to prove to the lender that your business has been operating successfully. This history is proved both by the credit profile and bank records. This informs the lender that your company has been operational for a while; that it is able to execute carpentry tasks effectively and is profitable.
Naturally, a lender will want to learn about your plans for the business, namely how you intend to use the funding and how this will contribute to turning a profit in the future. It is helpful to have purchase orders to substantiate the business’ viability. If you don’t have any, you can simply break down the specifics of how you will spend the loan money and the ways it will help your company grow.
Finally, you will need to provide substantiating documentation for all claims you make during the application process. These documents include:
Bank statements: Providing your bank records to the lender shows, in detail, how you have spent money historically (accounts payable). It also gives the lender an idea of how you invoice (accounts receivable) and your competence at recuperating funds from clients.
Tax returns: You will also need to supply your tax returns. Provide these annual filings to highlight that you are a well-established business that pays taxes and meets all legal obligations pursuant to the jurisdiction in which you operate. In Quebec, you will need to provide both Federal and Provincial tax returns.
Financing Alternatives For Your Carpentry Business
If you are struggling to access funding, there are business loan alternatives that you should consider. These give you usable funds that you can put toward your business expenses. These options include:
Equipment Financing: If you plan to use the loan funds to improve your tools or lease new equipment, it may be a better option to finance the equipment directly. By getting a loan for the equipment, the tool itself secures the loan as collateral. You can use the equipment so long as you make the regular payments on the loan.
Microloan: While many larger-scale lenders offer six-figure funding, a microloan gives you access to a smaller amount, usually in the five-figure range. You can use these funds toward all types of business expenses, though at a smaller scale than with a conventional loan. It can also grow your credit and fortify your business history.
Business Line of Credit: Another approach is to get a business line of credit which gives you access to a set amount. You only pay interest on the money you’ve used. When those funds are returned, you retain full access to the line of credit. Interest rates can be fairly competitive, though the actual line of credit amount varies based on your business and its history.
How long will it take to get a business loan for my carpentry business?
The amount of time it takes to get a business loan depends on your situation. Approaching traditional lenders like major financial institutions tends to be more time-consuming. Conversely, if time is of the essence, alternative lenders work much more quickly. While the interest rate will be higher, if you are urgently in need of funding and prioritize convenience, this may be a better-suited approach.
How do I get the best rate for my carpentry business loan?
The most important thing to do in order to get the best possible rate is to do your research. Visit loan comparison sites to get quotes and view the rates for which you are eligible. This will give you a more thorough understanding of what rate of interest and funding amounts you can expect. If you are not content with the amount, there are other steps you can take. To make yourself a more desirable borrower, the first step is to improve your credit score. Often, this involves taking small loans or lines of credit and using these to develop a better history of repayment. If you do not have the time to improve your credit score, another option is to provide collateral. Whether it is placing a lien on your residence or equipment, securing the loan will make you a more desirable borrower.
Can I get a business loan for my carpentry business if I have bad credit?
If you have poor credit or a credit profile that is not yet well-established, you may want to consider alternative lenders. These companies have flexible requirements; and, though the interest rate is higher, the approval process is generally a lot easier.
A business loan for your carpentry business can give you a distinct edge over competing companies. You can use the funds to finance everything from equipment to labour, enabling you to help your company grow and thrive. So long as you do your research ahead of time and use all resources available to you, like a loan comparison site, you can get the best terms possible.
Need Helping Finding The Right Business Loan?
Do you own a carpentry business? Do you need additional funds to help grow your business? Loans Canada can help you compare lenders and loan offers to find you the best option based on your unique needs.
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