From blueprint to reality: Ashdown a key player in the construction financing process

When you’re hunting for a mortgage to buy a house, finding the best rates is as easy as checking out bank ads online. But for growing construction businesses seeking financing, understanding the ins and outs of rates and terms can feel like cracking a code.

“Most business owners aren’t finance experts,” explained former banker Brad Kiendl. “They’ve got a team for that, maybe a controller or CFO. However, dealing with financing often ends up on the back burner as they focus on more pressing needs within the company. Bank agreements are lengthy, confusing and don’t seemingly have a lot of wiggle room and thus clients simply end up taking the first deal presented to them.”

Inside Knowledge

Kiendl knows this better than most. He spent years at big banks, fighting to get the best deals for commercial clients. But he felt he could do more to guide them through the maze of commercial financing.

“Every business had a different deal,” he said. “Rates, fees, structures – they all varied. I saw how much a bank’s account manager could influence the final financing deal.”

Wanting to bridge this gap, Kiendl started Ashdown Capital. They help businesses get more working capital, buy equipment, start new projects, or invest in real estate.

“I wanted experts who truly get financing, who understand how different banks and lenders think,” said Kiendl. “With our inside knowledge, we uncover better pricing, more appropriate structures, and help navigate the unique risk factors that construction companies present. I wanted to show what’s possible.”

Six years later, Ashdown has a team of 27 people who mostly work with clients in British Columbia and are moving into Alberta. Why B.C.? It’s a hotspot for construction and development.

“Construction companies, developers, contractors – they all need financing and lots of working capital,” Kiendl noted.

But the construction world has its own challenges. Payments can drag, and even when they arrive, there are holdbacks. Banks get cautious when it comes to construction financing. “Construction is a roller coaster,” Kiendl said. “There are long gaps between spending and getting paid. Plus, builders’ liens take priority over bank financing, so banks can be wary. It’s tough.”

Navigating the Money Maze

Despite the hurdles, BC’s construction scene is booming.

“We see fantastic businesses growing like crazy, struggling to match their growth with enough working capital. It’s a real challenge,” said Kiendl.

Most construction companies fund their day-to-day with credit lines. Banks typically do something called “margining,” using their receivables and inventory to secure financing. But it looks back, not forward and often the banks just offer their standard formula.

“We see companies in a bind. They’re booming, tackling big projects, winning great business, but they’re not getting the financing they need,” said Kiendl. “The banks give them the financing they needed last month or quarter, not what they need to accomplish future work”

“Getting financing in construction is no cakewalk, no matter the size. Unless you’re swimming in cash, it can be tough to get and even tougher to know if you’re actually getting a good deal.”

Brad Kiendl – Principal, Ashdown Capital

The real pinch is felt by small-to-medium-sized businesses aiming to expand, looking for loans from $50,000 to a million.

“Getting financing for this space is tough. Most banks treat it like a personal loan,” Kiendl explained. “Walk into a bank with a growing business, doing millions in sales, with new projects in the pipeline. If you ask for a credit line, they’ll often want your house as security.”

Lately, Ashdown has been turning this around, getting true financing packages. Kiendl tells of a recent construction client doing $3 million in sales, offered a $42,000 credit line by a bank. Ashdown was able to secure them $500,000 by taking them to the right bank and then showing the bank the full picture and how the deal could be structured in a way that works for everyone.

Larger clients aren’t exempt from banking challenges, and Ashdown also works with companies with revenues over $100 Million and everything in between.

“Getting financing in construction is no cakewalk, no matter the size. Unless you’re swimming in cash, it can be tough to get and even tougher to know if you’re actually getting a good deal. Often larger businesses are overlooked by the banks and sometimes taken for granted.” Kiendl acknowledged. “For the big players, we help by negotiating better structures and ensuring they have forward looking capital that is priced and structured to their benefit.”

Trends and Challenges in Financing

Beyond the complexities, financing in construction is wrestling with other big issues, from rising inflation to labor shortages. But the standout challenge is interest rates.

“Banks are pickier now due to higher rates,” Kiendl noted. “We’re seeing more projects, from land loans to full-on construction, going the alternative financing route. That drives up costs, and those get passed on to developers and ultimately the end consumer.”

This has led to projects stalling as teams wait for better conditions.

Consolidation is another theme. As construction companies grow, they’re snapping up rivals or similar businesses. But this presents a puzzle, as these deals often lack sufficient assets to back the loans.

“Imagine a client buying a $10 million business, but their assets – equipment, receivables, inventory – are only worth a few million. The bulk of the loan is unsecured,” clarified Kiendl. “It’s a head-scratcher for banks. But it’s a road we’re travelling a lot lately, helping to get the banks comfortable with cash flow lending for acquisitions.

He added that nobody wants financing to become the deal-breaker – but, it’s always been the trickiest part in the acquisition space. It’s the area where Ashdown can help companies the most.

While acquisitions come with their own set of challenges, Kiendl and his team find satisfaction in aiding in acquisitions and management buyouts, where senior leaders and employees buy out owners.

“They’re some of the best stories,” Kiendl enthused. “These businesses often thrive after and it’s a win-win for all parties. Financing them can be tough, but we relish the challenge.”

In the complex world of construction financing, Kiendl’s advice boils down to this: Don’t wait for trouble to start seeking financing.

“If times are good and you don’t need money, that’s when you should secure financing. That’s when you’ll secure a credit line and the most favourable terms,” he advised. “There might be a small setup or monitoring fee, but think of it as insurance. When things get tough, and your results aren’t trending in the right direction, it’s much harder, or even impossible, to secure financing at that point.”

If your construction company is on the growth path, explore the financing options Ashdown Capital offers today. They’re your partner in navigating the financial landscape of construction.