And while COVID-19 has led to production shutdowns in major cities, there are still 36 states where construction is considered an essential service at the time of publication of this article. Your search in advance is optional, but it will greatly facilitate the rest of the process of setting up your construction business. Especially when your research is complete, it will be much easier to complete the next step in the process: writing your business plan. As there is always a demand for construction companies, it is an industry in which there can be many players. Some are established and can succeed, and others faint and fail. After feeling that you have a good understanding of your local market, you can start creating a business plan. This is one of the most important documents you create in the beginning, as it can help you keep your business on track and increase your chances of success. This plan is also what you`re going to give to lenders to facilitate financing, which means it`s extremely important to be detailed and make good use of all that market research. These loans are somewhat different from the other two in that they are designed to help small businesses acquire large fixed assets (i.e., large appliances and commercial real estate). CDC loans offer borrowers up to $5.5 million and have repayment terms of 10 or 20 years. This loan could be especially useful if you need help buying heavy machinery for your construction business. Don`t be intimidated by the idea of a business plan – you`re the expert on your business and there`s always help. If no one in your company has formal writing experience and you feel more comfortable with a professional draft of the document, you can hire someone to help you.
At the state level, your location is the main factor in licensing and permit requirements. However, you need to review local zoning bylaws first. According to the SBA, zoning bylaws can “restrict or completely prohibit certain types of businesses from operating in an area,” and while “you may have fewer zoning restrictions if you start your home-based business.” Zoning bylaws may also apply to home-based businesses. “3 So make sure the location you choose is viable before you check the permits and licenses that the county and city need. Researching your market, designing a concrete plan for running your business, and getting help can ensure you have a solid foundation for growing your business. It can also help you avoid the pitfalls that so many new construction companies encounter. So where do you start? Without the proper license or permits, your construction business may not only see high fees and tax penalties, but also the possibility of a regulatory shutdown. Construction companies have ups and downs (for example, the 2008 economic crisis hit construction companies hard), but it`s an industry that will always have demand – and where there`s demand, there are opportunities. SBA loans aren`t the only options for small business owners to finance their business. In fact, there are many loans that come with less stringent credit history requirements. Device financing is a particularly useful option for borrowers who do not have a flawless or long-standing credit history. Equipment loans are designed to help entrepreneurs buy machinery for their business.
The loan amount is specifically related to the cost of the equipment to be purchased and can only go to that purchase itself. Apply for an Employer Identification Number (EIN) from the IRS (see Resources). Contact a surety company to request a bond. Your state or city government can provide a list of reputable companies. Even if the scope of your planned work or your local government doesn`t require it, retention can make your clients more comfortable hiring from you. While many construction startups start in homeowners` homes, you`ll eventually want to move to more official commercial premises to legitimize the business. The property you choose as your home base should have enough office and storage space, as you are likely to store equipment and tools on site. The location you choose should also provide enough space to park the vehicles used in the business. Here you describe in detail the structure of your business.
You need to include the following: So start with market research. You want to know how many local construction companies are already operating in your area, what they specialize in, how much they charge, and what their reputation is. Along with this, you also need to have a similar understanding of your potential customer base – how many of them are there, their average age and status, interests, etc. Knowing these things can help you develop a better business plan and have a competitive advantage when you finally get on the playing field. Construction is one of the main industries for startups; however, it also has one of the highest failure rates. 63.6% of construction companies close their doors in the first five years, whether due to a lack of business knowledge and experience, a lack of finances or a lack of planning.1 They do not have to be part of it. Vehicle insurance: Auto insurance protects the machinery you buy, such as construction equipment or trucks. You can also take out vehicle insurance for equipment rental. Once you`ve completed a business plan that satisfies you, you`ll need to review the rules, licenses, and records required at your business location. The requirements of the construction industry make starting a business a unique process. Your state, county, or city may have certain laws, which means you need to make sure you`re clear about everything you need to do to get started. But here are some overarching considerations to get started as a foundation.
Make your business a legal entity by registering it with your state and local governments. You can register your construction company as an LLC or Corporation. This process can provide you with personal protection as well as legal and tax benefits. You can also register your construction company federally to get a federal tax identification number that you can use to protect your business and logo. While this is a good place to start, the SBA provides a more general overview, and you may want more specific information. Here, publications from the local industry can help you make your research a reality. SBA loans are a great option for small businesses: they come with low interest rates, generous terms, and a wide range of loan amounts. Banks work with the SBA to lend money to small businesses, while the SBA offers a guarantee of up to 85% of the total loan value. This guarantee means that the SBA will pay the bank up to 85% of what the borrower owes in case the company is unable to pay. However, as a contractor, you should also consider your construction accounting processes in your business plan.
For example, how do you do billing? Some customers may want a fixed plan, while others want a breakdown of time and hardware. Net-30 billing terms may be common, but will you offer discounts to encourage faster payments? Take stock of your tools and equipment. Maintain any devices you already own that need to be repaired. Buy all the items you need to perform basic design tasks, such as ladders, saws, joinery plans, drills, and wicks. When considering licenses and permits, you should also think about insurance for you and your employees. Given the dangerous nature of many construction jobs, it`s important to make sure you`re insured in case of injury. Accidents happen, and it`s important for any contractor to make sure they fully understand all kinds of responsibilities. Even if you`re not ready to commit to a comprehensive contingency plan at first, you should at least have a realistic idea of what it would look like for your business if something happened. Apply for a loan to get the financing needed for your new business, e.B. for new tools or a small truck. Bring your formal business plan with you to your banker. Discuss your reasons for starting a construction business, including why you believe it will succeed.
Talk about your loan options, including interest rates and terms. If you have a business plan before you start the business, you can organize yourself and stick to it. You`ll also likely need a business plan that you can send to financial institutions if you want to get financing for your business. Here`s what you should include in your business plan: Insurance for your construction business is just as important as registration. Construction is inherently a risk-prone business because you work with heavy machinery, electricity, and all sorts of other equipment that could cause significant damage. Here are some documents that could appear in a construction company`s business plan: Unemployment Insurance: This insurance protects any employee who loses their current job due to layoffs, business closures or other cases. You need to buy, lease or lease equipment, tools and vehicles to start your business. .