Kinds of loans

4 Replies

This is more of an informative question for a contractor to be working with a developer. Since my journey on trying to get into RE, I stumbled on the power of OPM or from lenders. Ever since our company operated, we have never had to borrow from anyone else except immediately family thru company-company loan. So I have zero experience on applying for a loan or getting it approved, or what is fair or not.

I have been talking to a developer to do the flooring and paint on their 75 condos. He decided to visit me today and i was on the end of all jobs except one and had to gather everyone to one place and take a break longer while waiting for the next project. Anyway, he saw the capacity and offered the cabinet and bathroom jobs to get priced, i do not bid on jobs where i know if they snag on payment, i would be able to pay the labor for a week more. I politely told him that I will evaluate my resources and will give an answer next week. I ran random numbers, and surely I won't be able to do it alone as it is about 25-30k per @ 75 total units divided in 5 phases.

My question is, what type of loan will i be searching for when doing some google/approaching individuals/banks that will allow me to get the financial confidence to bid on these kind of jobs. Normally I will walk away directly in something like this, but I wanted advise first before doing so. or what are my best options in cases like this? Thanks BP!

You are describing a business operations loan, a commercial loan based on your collateral, experience, management abilities and credit as well as the operation or jobs to be funded.

Your question could take a book to address, your best bet is to simply talk to your bank in the commercial loan department. All you need is confidence going in, they will guide you from there in the process.

You can also talk to your accountant as you'll need your financial statements and tax returns for about the past 3 years.

Then shop for the best loan terms, you may pay a bit more with this being your first loan, bite the bullet and begin establishing your business credit. Good luck :)

@Bill Gulley Yes, that might be a problem, the company is not that old yet nor the books aren't that stable to look, so it might not be the route that I have to take or if it is, it might be a slim chance, I will try still. I do have the confidence of going in, just that not confident in the financial side lol. There is no problem in biting the bullet, I only need to know how much the fees would be so I could factor them out on the bid, I could stomach 10% if the client pays within 90 days even, I have an unfair advantage on pricing/decision making as the owner had visited my operations. I will prepare the necessary documentation and shop around. I have the figures in my head already just need to put it on paper, start compiling paperwork and all that. Thank you very much Bill.

Why not bid the materials, labor and your fee and have the owner finance it?

Most suppliers can carry materials for 90 days, use them.

Take a draw for labor from the owner. Good luck :)

Bill G. I might talk to my suppliers about that, maybe have an agreement with the owner for collection, according to my computation this might be 70/30 labor/material or even 60/40, I am sure I won't qualify for that much credit in materials, so it might just work if they deal owner-supplier and me on the side, HD offered me 5-10% rebate, so it just might work, got an appointment with them on Friday, lets see where they go. Owner weekly draws? Do they allow that? lol. If they do, then I shouldn't have any problems.
An input from a developers point of view might help me with this. I will message some.