Two of North America’s premier concrete events took place just a few short months ago. Anyone who attended World of Concrete in January or the Canadian Concrete Expo in February would no doubt feel pretty excited about the state of the industry. The convention centers were filled to the rafters with exhibits that showcased the most innovative products and technologies available to customers, and legions of buyers walked the show floor to find the right combination of products that will help make their operations more efficient and profitable.
While there is certainly reason to celebrate the excitement and activity that took place at these events, there is also an obvious and critical challenge that impacts this industry: the difficulty attaining capital that not only funds equipment acquisitions, but also provides the lifeblood for companies to pursue new opportunities, hire staff and improve operational efficiencies. All of these strategic initiatives require money. But banks, which have historically been the first financing option of concrete business leaders, have been far less flexible in recent years in providing loans. Many have placed strict covenants on borrowers, requiring stringent financial evaluations that slow approval times to a crawl and place a burden on borrowers in terms of repayment.
Faced with a confluence of limited funding and protracted time frames, concrete companies would be well-advised to pursue other options for capital and cash flow, most notably tapping into the new generation of asset-based specialized marketplaces that successfully connect borrowers with expedient financing.
Investing in New Technology Yields Competitive Advantage
Many new products and technologies were on display at these two seminal trade shows, showcasing the latest advancements that enable construction companies to deliver a premium product, save time and money, increase worker safety, reduce their carbon footprint and, most importantly, improve financial performance. Investing in new technologies can help construction companies rise above the competition, win new business and increase market share. But new technology requires money, and securing financing can be a time-consuming, labor-intensive process. Fast access to financing for equipment and technology purchases is now essential for construction companies, enabling them to react quickly to market opportunities and win projects that help them thrive.
Specialized Marketplaces: What Are They?
Marketplaces that specialize in attracting and delivering financing options to concrete and construction businesses have been successfully serving customers for years. These providers access a ready network of stable, resource-rich and knowledgeable lenders that understand the nuances of this sector. Just as importantly, specialized marketplaces can bring multiple offers to a company, giving the company the benefit of choosing the financing program that best suits its needs. The lenders that participate in these marketplaces can include financing companies that focus solely on the concrete sector, as well as a mix of banks and other sources that must move quickly to compete in the marketplace. This creates an environment that is borrower-focused, giving the applicant the power to select the terms and structure that best suit them.
Opportunity Costs
Any successful business in the concrete sector would agree that speed is an absolute requirement for winning projects. Any pause or delay in responding to a bid or securing the assets needed for a job can result in jobs lost to more nimble competitors. This can irrevocably tarnish a reputation and preclude the company from winning future contracts. Unfortunately, quickness and responsiveness are not the forte of banks, which can often delay lending decisions for weeks. A specialized marketplace, on the other hand, is perfectly aligned to serve the unique needs of this industry. The hypercompetitive environment rewards lenders that are aggressive and nimble. It creates a more level playing field where lenders earn the business, and empowers concrete companies to actively pursue the projects they want with the full confidence of knowing they can access the financing in an expeditious manner.
Rising Above Cash Flow Challenges
Construction businesses are notoriously cash flow strapped and are constantly challenged to maintain a tenuous balance between payables, receivables and capital expenses. Today’s economic climate of inflation, high fuel costs and wage pressure caused by the skilled labor shortage add to the cash flow challenge. Without the ability to finance equipment and other strategic needs, maintaining a competitive operation would be very difficult. Traditional banks and credit unions have been the primary sources of capital for the construction industry, but their practices are not always aligned with the needs of the industry. Alternative lenders that look beyond a company’s balance sheet to extend asset-based loans using equipment or real estate as collateral can provide a much faster path to financing. Having a full range of financing options available removes the obstacle of cash flow from the construction business’s pursuit of capital to finance growth initiatives.
Equipment Manufacturers Understand the Importance of Financing
Equipment manufacturers should also tap into specialized marketplaces as a way to provide financing to their customers during the purchase process. This route can be beneficial to original equipment manufacturers (OEMs) that desperately need to fund deals but may also become handcuffed by the practices of traditional banks. For example, traditional banks may reject financing for subprime buyers, but an alternative lender may be able to offer financing based on the buyer’s asset collateral, allowing transactions to be completed that would otherwise be declined. By offering an alternate path to financing, the manufacturers have the ability to reduce the number of declines, close more deals and also strengthen relationships with customers, an objective that is becoming even more important in today’s competitive environment.
As banks continue to limit lending activities in the concrete industry, suppliers and contractors must identify other sources of capital that can finance the purchase of heavy equipment and address other cash flow challenges. Marketplaces that specialize in connecting lending sources with the concrete industry are proving to be a valuable resource for this sector. With their ability to create an environment that emphasizes fast decisions, competitive terms and an eagerness to work directly with borrowers, lenders that participate in these marketplaces are perfectly positioned to help concrete and construction companies finance assets and grow their revenue.
