When you think of construction lending, you probably think of banks first. But while a traditional line of credit is certainly a viable option, alternative lending is becoming a more popular choice, especially among today’s small businesses. Sure, fees and interest rates will apply but the construction industry can benefit from this type of loan in many ways. 

To many contractors, bank loans are relatively cheap, but they come with strict underwriting requirements. If you don’t have a lot of assets or you have poor credit, it can be impossible to obtain this type of loan. Plus, to guarantee their security, banks over-collateralize, which poses a great risk to the business owner in the event of default. 

This is why many construction companies try alternative lending sources. Yes, they’re more expensive, but they have a certain flexibility that banks do not. Here are some types of alternative lenders that are available to the construction sector, as well as their pros and cons:

Mobilization Funding

Advanced lenders specializing in mobilization funding will advance contractors the money they need upfront to start the job at hand. It’s cheaper than an MCA but it has high-interest rates.


For subcontractors, payment from clients can take a long time — sometimes up to 90 days after the submission of the invoice, which requires three months of floating payroll, materials, overhead and insurance. A factoring company will advance the contractor a percentage of their invoice so they can get the money they need to fuel their operations. This is one of the most affordable forms of alternative lending but there’s a lot of paperwork and red tape.

SBA Loan

The government will back specialized loans to help small companies as yours grow. Rates are comparable to standard lines of credit but there’s a lot of underwriting involved, with this type of loan being tough for many companies to qualify for.

Merchant Cash Advance

A Merchant Cash Advance is easy to obtain, with an instant underwriting process but the fees are very high–sometimes exceeding 200% APR.  Also known as payday loans, they are simple and quick but are very expensive. Apply here if you think this option is right for you.

What type of alternative lender will you choose? Let us help you with this, contact Aspen Commercial Lending today!