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Construction projects can be some of the most exciting yet risky business investments—especially when SBA loans are involved. Whether you're building a new facility, renovating an existing property, or expanding your operations, knowing how to avoid common pitfalls can save your business time, money, and headaches.
In this article, SBA financing expert Beau Eckstein outlines essential tips for navigating SBA construction loans and how to set your project up for success.
🏗️ Why Construction Projects Often Go Sideways
Construction projects are notorious for going over budget, missing deadlines, and running into unexpected complications. When SBA financing is part of the equation, things can get even trickier. That’s why it's critical to plan meticulously and surround yourself with the right team from the start.
“Construction projects are known to get messy sometimes,” says Beau. “So it's crucial to prepare.”
✅ Tip #1: Vet Your Contractor Thoroughly
The first thing SBA lenders will evaluate isn’t just your business—it’s your contractor.
“Banks are going to give the contractor the sniff test. They want to make sure your contractor has decent financials and a solid reputation,” Beau advises.
Your contractor should:
- Have a proven track record with similar-sized projects
- Be properly licensed and insured
- Be financially stable
- Be able to provide references and project timelines
If your contractor can’t check these boxes, your loan could get delayed—or denied.
💵 Tip #2: Build a Bulletproof Construction Budget
Creating a detailed and flexible construction budget is non-negotiable. You need to account for materials, labor, equipment, permits, and miscellaneous costs, plus the unexpected.
“Right now, prices are rising. So you want to pad that construction budget and have a solid construction reserve,” says Beau.
Here’s what to include:
- Competitive bids from multiple contractors
- Contingency reserve (typically 10–15% of total budget)
- Construction interest reserve (to cover loan payments during non-operational periods)
- Line-item breakdown of each phase of the project
🕒 Tip #3: Nail Down Timelines and Project Milestones
Construction timelines often slip due to delays in permitting, weather, materials, or labor. That’s why it’s critical to have a realistic timeline and build in some buffer.
“Understand your timelines to get the project done—and make sure they’re well-documented in your construction plan,” Beau notes.
Include:
- Project start and completion dates
- Key construction phases
- Payment schedules tied to milestones
- Permitting and inspection checkpoints
🛠️ Tip #4: Understand Your SBA Loan Options
There are several SBA loan programs that can finance construction, but each comes with different terms and structures. The two most common are:
- SBA 7(a) Loans – Great for smaller projects, working capital, and leasehold improvements.
- SBA 504 Loans – Ideal for larger real estate and equipment-heavy projects, often offering fixed rates and longer terms.
“We help you navigate which loan program makes the most sense for your project,” says Beau. “Getting this right from the beginning is key.”
🔐 Final Thoughts: Protect Your Investment
Construction with SBA financing requires more than just vision—it demands strategy, planning, and professional guidance. Make sure you’ve got a trusted team and advisors who understand the nuances of SBA loans.
“You're not making any money when you're under construction,” Beau reminds us. “You have to plan for that and build it into your loan structure.”
Ready to Get Started?
Whether you're still pricing contractors or ready to submit your SBA loan application, Beau and his team can guide you through every step of your business acquisition or expansion.
📅 Schedule a call now at BookWithBeau.com
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Subscribe to the YouTube channel for more tips on SBA financing, business ownership, and smart investing. Beau has over 20 years of experience helping entrepreneurs secure funding and scale smarter.