Key Takeaways  

To make a solid choice when selecting a General Contractor (GC) for your construction project, focus on these critical areas: 

• Experience & Fit: Ensure the GC is appropriately sized for your project and has relevant industry experience and past job history. 

• Communication & Subcontractors: Look for a GC who demonstrates strong, proactive communication skills and has a solid relationship with their subcontractors. 

• Financial Health & Bidding: Confirm they are well-capitalized to avoid issues with loan proceeds. Their bid must align with the plans and include local subcontractor bids. 

Starting a small business construction project is an exciting and often daunting undertaking. The success of your build hinges on many factors, but none is more critical than selecting the right General Contractor.

We specialize in providing loans to small businesses across the country, with a dedicated construction loan team that works with you every step of the way. This guide cuts through the confusion, providing a clear roadmap and the essential criteria you need to evaluate potential GCs. We’ll outline key qualification questions, specific requirements for owner-builders and the crucial documentation needed to start the contractor qualification process. By the end of this blog, you'll have the framework to make a solid choice and lay the right foundation for your business's future.  

3 Main Questions for General Contractor Qualification

When you're ready to select a General Contractor (GC) for your project, you need to go beyond just the price tag. Your decision should be based on an assessment of their capacity, experience and integrity. Asking these key questions is essential for a solid choice: 

Does the contractor's experience match your project needs? 

A GC's past work is the best predictor of future performance. You need assurance that they can handle a project of your scale and complexity. 

• Is the GC appropriately sized for your project? A contractor who typically handles much larger or smaller jobs might not be the right fit. 

• What is the GC's past job or adjacent experience? Ensure they have experience relevant to the type of facility you are building. 

• Do they have industry experience? Familiarity with your specific industry (e.g., medical, veterinary, or self-storage) can be a significant advantage. 

• Have they worked with your design team before? A pre-existing relationship with your architect or engineer can help streamline communication and problem-solving. 

Are they financially stable and transparent in their bidding? 

The financial health of your GC is critical, it ensures they can manage cash flow and complete the project without resorting to risky measures. 

• Are they well capitalized? Your lender will be concerned about whether the GC might use your loan proceeds to float other projects where payments are delayed. 

• Does the bid align with the plans? Check for any major gaps or scopes of work missing from the bid. 

• Does the bid include allowance line items? This transparency is important. Also, confirm the GC has actively bid the project with local subcontractors. 

What is Their Approach to Communication and Teamwork? 

Construction is a team sport and strong communication is key to avoiding costly mistakes and delays. 

• Do they demonstrate active listening and strong communication skills? A good GC will proactively share information with the entire construction team. 

• What is their relationship like with their subcontractors? A strained relationship can lead to poor quality and delays. 

• Do they have a solid list of references? References should be able to communicate in detail about their experience with the proposed GC. 

• How does the GC add value to the team? Will they help you achieve your overall objectives and priorities? 

• Will they self-perform any of the work? Knowing what they handle in-house is part of understanding their capabilities and approach. 

Qualification Requirements for Owner-Builder Contractors 

In some cases, the borrower or business owner may choose to act as the General Contractor, known as an owner-builder. It's important to understand that the qualification requirements for an owner-builder are the same as those for an independent third-party GC. Your construction loan team will need to explore several additional points: 

• Licensing and State Regulations: The owner-builder must be a licensed contractor in the state they are building, if applicable. It is important to consider if the state even allows owner-builders for commercial projects. 

• Demonstrated GC Experience: Project management experience is not the same as being a general contractor and is not a substitute for GC experience. The owner-builder must be able to demonstrate they have completed/built a comparable project in the past 12-24 months. They'll need to show evidence that they build similar projects for a living. 

• Staffing and Accounting: They need to be able to demonstrate that they have the adequate office and accounting staff to manage the project. 

• SBA Loan Specifics: For SBA loans, owner-builders (or GCs closely affiliated with the borrower) must collect two outside bids to confirm the project cost is below market cost. No profit can be made by the owner-builder per the SBA’s Standard Operating Procedure (SOP). 
• Bonding Capacity (Preferred): While not always required, it would be preferred that they show the capacity to be bonded up to the contract amount. 
  

Live Oak Contractor Qualification Checklist 

Live Oak Bank is dedicated to working with small businesses on their construction loan journey. To start the process of contractor qualification, you'll need to gather a preliminary list of documents. 

Preliminary Documents to Gather 

• Two years of tax returns are required for construction of $1.5MM+ 

• Interim financial statement including P&L and Balance Sheet within 90 days is required for construction $1.5MM+ 
• Project list over the last 3 years is always necessary  
• General contractor's license information is required
• W9 form is required
• Contractor due diligence form is always required

Pro-tip: Start gathering these documents early. While this is a preliminary list, be prepared for additional documentation to be required for the final qualification. 

A General Contractor is the single most important decision for a successful and stress-free small business construction project. By focusing on their experience, financial stability, communication skills and thoroughly vetting their bid, you are setting your business up for success. 

Don't let the complexity of the process intimidate you. Having the right financial partner is key. Live Oak Bank specializes in providing construction loans to small businesses and has a dedicated team to guide you through the contractor qualification process. 

Ready to build the future of your business? Take a look at our robust General Contractor Qualification document or contact Live Oak Bank's construction loan team today to discuss your project and start the pre-qualification process! 

FAQs

Q: How important is a General Contractor's financial stability for my project? 

A: A General Contractor's financial stability is extremely important. Your lender, like Live Oak Bank, will assess if the GC is well-capitalized. This is to ensure they won't divert your loan proceeds to float other delayed projects, which could jeopardize the timely completion of your construction. 

Q: Can I be my own General Contractor (Owner-Builder) for an SBA construction loan? 

A: Yes, you can act as an Owner-Builder for an SBA construction loan, but you must meet the same stringent qualification requirements as an independent third-party GC. For SBA loans, you must collect two outside bids to confirm the project cost is below market and the SBA's Standard Operating Procedure dictates that no profit can be made by the owner-builder. 

Q:  What is the difference between project management experience and General Contractor experience? 

A:   The difference is significant: project management experience is not the same as being a General Contractor and is not a substitute for GC experience. A qualified GC needs to demonstrate they have the necessary staff and accounting to manage the project and have completed/built a comparable project recently.