Contractor Working Capital: Bridge Cash Flow Gaps Between Jobs

The Contractor Cash Flow Problem

Construction is a cash-intensive business with long payment cycles. You buy materials, rent equipment, and pay crews today—then wait for payment to move through approvals, pay apps, and accounting processes. Suppliers might expect payment in 10–30 days, but owners and GCs commonly pay in 30–90+ days (and retainage can stretch things even further).

The bigger the job, the bigger the cash flow gap. A $100,000 job might require $40,000 in materials and labor before you see a dollar back. Multiply that across multiple simultaneous jobs and you can have hundreds of thousands tied up in receivables—while payroll still runs every week.

Here’s the uncomfortable truth: profitable contractors can still run out of cash. Profit shows up on paper at the end of the job, but payroll, materials, insurance, fuel, and subs hit your bank account in real time. Multiple active jobs compound the problem, and banks often don’t underwrite contractor cash flow the way contractors actually operate.

Key stat: Levelset’s national construction payments report notes that construction payment is “83 days on average,” based on a survey of 500+ construction professionals (Levelset & QuickBooks Time). Source.

Working capital solves this by bridging the gap between job costs and customer payments—so you can keep jobs moving without sacrificing your cash position. This guide covers every working capital option available to contractors, from business lines of credit to invoice factoring.

6 Types of Working Capital Available to Contractors

1. Business Lines of Credit (Best for: Ongoing Cash Flow Management)

A business line of credit is revolving credit: you get approved for a limit, draw what you need, repay, and draw again. This is one of the best tools for contractors because cash needs fluctuate from job to job and month to month. You only pay interest on what you use, and once it’s set up you can draw quickly when you win new work.

Typical terms: $10K–$500K, 12–25% APR, revolving access, with approval often in 2–5 days. Many programs prefer 640+ credit and 2+ years in business. Pros: reusable, flexible, and great for multiple jobs. Cons: annual renewals, limits may be lower than needed, and underwriting can be strict.

Real scenario: You have 3 jobs going simultaneously. You need $15K for materials on Job A, $8K for subcontractors on Job B, and $12K for equipment rental on Job C. A line of credit lets you draw exactly what you need for each job and pay it back as customers pay you.

2. Working Capital Term Loans (Best for: Specific Job or Project Funding)

A working capital term loan is a lump sum loan repaid over a set period. Unlike a line of credit, it’s not revolving—you get the money once and repay on a fixed schedule. Contractors often use term loans when they have a specific project, a clear budget, and a clear repayment plan tied to progress payments or a known invoice date.

Typical terms: $10K–$250K, 10–30% APR, 3–24 months, funded in 1–3 days. Credit requirements often start around 600+. Pros: fast, predictable payments, can fund large purchases immediately. Cons: higher cost than equipment loans and payments are due even if a customer pays late.

Real scenario: You won a $120,000 commercial roofing job. Customer pays NET 60. You need $40,000 for materials and $15,000 for labor upfront. A 12-month working capital loan funds in 2 days, you complete the job, and pay down the loan when the customer pays.

3. Revenue-Based Financing / Merchant Cash Advance (Best for: Emergency Situations)

Revenue-based financing (often called MCA) advances money based on your recent revenue, repaid via daily/weekly ACH deductions. Underwriting focuses heavily on bank statements and deposits, so credit can be less important than cash flow. This is a speed-first product.

Typical terms: $5K–$250K, factor rates 1.2–1.5x, 3–18 months, funded same day to 24 hours. Pros: very fast approval, bad credit often OK, no collateral. Cons: expensive, payments are frequent, and the factor rate adds up quickly.

Cost example: Borrow $25,000 at a 1.35 factor rate = repay $33,750 total. Expensive, but you can get funded today instead of next month.

Real scenario: Your excavator breaks down Monday. Repair is $18,000 and you have a job starting Wednesday worth $65,000. Revenue-based financing funds Tuesday, you fix the excavator, and the job starts on schedule.

4. Invoice Factoring (Best for: Large Invoices, Slow-Paying Customers)

Invoice factoring converts accounts receivable into cash. You sell an unpaid invoice to a factoring company and receive an advance (often 70–90%) quickly. When your customer pays, the factor collects and sends you the remainder minus fees. For contractors with large commercial invoices and slow payment terms, it can be one of the most practical “payment gap” tools.

Typical terms: 1–5% fee per 30 days (varies), 70–90% advance, with 24–48 hours setup for the first invoice and faster thereafter. Credit requirements: your customer’s credit matters more than yours. Pros: fast, can be off-balance-sheet, and approval can work even with weaker credit. Cons: costs reduce invoice value, and the factoring company may interact with your customer.

Real scenario: You completed a $150,000 electrical job for a property management company with NET 90 terms. You need cash now to start two new jobs. Factor the invoice and access cash quickly, then receive the remainder (minus fees) when the customer pays.

5. Equipment Financing (Can Also Help Cash Flow)

Equipment financing isn’t “working capital” on paper, but it’s one of the best ways to protect working capital in reality. If you buy a $45,000 skid steer in cash, that’s $45,000 removed from your job funding. If you finance it, you preserve cash for materials and payroll.

Typical terms: $5K–$500K, 6–18% APR, 2–7 years, often funded in 24–48 hours. Pros: lower cost than many unsecured working capital products and longer terms. Cons: must be used for equipment, and the equipment is collateral.

Real scenario: You need a $45,000 skid steer. Instead of paying cash, you finance it at 9% APR over 5 years. Payment is about $933/month instead of $45,000 upfront—preserving $44,000+ in working capital for job costs.

6. SBA Working Capital Loans (Best for: Established Contractors, Patient Timeline)

SBA working capital options (like SBA 7(a) and SBA Express) can be the lowest-cost long-term solution for contractors with strong credit and financials. SBA Express can be faster than traditional SBA, but neither is a true “emergency” product.

Typical terms: $50K–$350K+ for working capital, ~7–10% APR, up to 10 years. Timelines: 7–14 days for SBA Express in some cases, and 30–90 days for SBA 7(a). Credit requirements are often 680+ with strong financials and 2+ years of history. Learn more at SBA loan programs.

Solving the NET 30/60/90 Payment Problem

The payment gap is the #1 cash flow killer for contractors. You complete work today but don’t get paid for 30–90 days. Meanwhile, your material suppliers want payment in 10–30 days and your employees expect weekly paychecks. Here's how to bridge that gap without destroying your cash position.

Understanding Customer Payment Terms

Contractor payments often include progress payments, NET 30/60/90, and retainage (often 10% held for 30–90 days after completion). Commercial customers pay slowly because of internal approvals, AP schedules, and their own cash flow priorities.

The math is brutal: a $100,000 job with $40,000 in costs, paid NET 60, means you float $40,000 for two months. Do three of those simultaneously and you can be out $120,000 for months—profitable on paper but cash-poor in reality.

Best Financing Solutions for Payment Gaps

Contractors generally rotate between three “gap tools,” depending on the job mix, customer quality, and urgency:

• Invoice factoring: Best for large invoices ($50K+) and creditworthy commercial customers. Cost is often ~3–5% of invoice value. Fast (24–48 hours). Downside: customer may know you factored.
• Business line of credit: Best for multiple jobs and recurring gaps. Cost is interest on what you draw (often 12–25% APR). Setup takes days; draws can be immediate after. Downside: stricter qualification.
• Working capital term loan: Best for a single large job with a known payment date. Fast funding in 1–3 days. Downside: fixed payments regardless of customer timing.

Real Contractor Payment Gap Scenarios

Scenario 1 — GC with multiple commercial jobs: 4 jobs simultaneously ($50K–$150K each), total receivables $380,000, terms NET 30 to NET 90. You need $120,000 to cover materials and labor while you wait. A line of credit (e.g., $150,000 limit) lets you draw as needed and repay as payments land.

Scenario 2 — Electrical contractor, one big job: $200,000 contract. Progress payments split across rough-in/completion with NET 60 final payment. You need $75,000 before the first progress check. A working capital term loan bridges the front-loaded costs and can be paid down when the progress payment hits.

Scenario 3 — Roofing retainage problem: 3 jobs total $450,000 with 10% retainage ($45,000) held for 60 days. Factoring retainage or using a short-term working capital loan can keep the next jobs moving until retainage releases.

Negotiating Better Payment Terms

• Negotiate progress payments and deposits upfront
• Offer a 2% discount for NET 10 payment when it makes sense
• Require material deposits before work starts (especially on price-volatile materials)
• Use financing as a backup plan: having a line of credit in place before you need it gives you leverage and options

Payroll Financing for Contractors: Never Miss a Paycheck

Missing payroll is how you lose your best employees. In construction, skilled labor is everything. When cash flow gets tight between jobs or during slow season, contractors need fast access to working capital to make payroll. Here are your options when Friday is coming and cash is tight.

Fast Payroll Funding Options (24–48 Hours)

• Revenue-based financing: same-day funding is possible; expensive but solves immediate payroll problems
• Working capital term loan: 1–3 day funding; fixed payments
• Line of credit draw: immediate access if you already have the line established
• Payroll-specific financing: some programs advance against receivables specifically for payroll needs

The True Cost of Missing Payroll

Paying 25% APR is expensive. Losing your best foreman because you missed payroll costs far more. When payroll is late, good employees leave immediately, word spreads fast, recruiting becomes harder, jobs slow down, and your reputation takes a hit that can cost you future bids.

Preventing Payroll Crises Before They Happen

• Establish a line of credit during good months (before you need it)
• Keep a reserve buffer when possible (even one payroll cycle helps)
• Use factoring when large jobs complete to replenish cash quickly
• Plan seasonality: if January–March are slow, arrange capital in November
• Work with a broker who can submit to multiple contractor-friendly lenders quickly

Financing Materials Purchases: Don’t Miss Jobs Due to Supplier Payment Terms

Material costs can be 40–60% of a construction job. Suppliers often want payment in 10–30 days, but your customer might not pay you for 60–90 days. That gap forces many contractors to turn down good jobs—not because the job is unprofitable, but because they can’t float the materials.

Material Purchase Financing Options

• Business line of credit: draw to buy materials, repay when the job pays
• Working capital term loan: lump sum for a project, fixed repayment plan
• Supplier credit accounts: NET 30/60 terms can help, but limits can be restrictive
• Revenue-based financing: fast but expensive; best for emergencies

Bulk Purchase Discounts vs Financing Costs

Sometimes financing actually increases profit. Example: supplier offers a 10% discount for cash payment on $50,000 in materials (that’s $5,000 saved). If you finance with an 18% APR working capital loan for 6 months, the financing cost is roughly $4,500. You still come out ahead and preserve cash flow.

Real Materials Financing Scenarios

Scenario 1: Plumbing contractor needs $35,000 in pipe/fixtures for a 90-day commercial job. Supplier wants NET 30; customer pays NET 90. A term loan or line of credit bridges the 60-day gap so you don’t turn down the job.

Scenario 2: Framing contractor can buy $80,000 in lumber at a 15% discount if paid immediately. Some lenders will finance bulk materials when you can show contracts/pipeline for where the materials will be used.

Building Supplier Credit Relationships

• Start small with supplier credit accounts
• Pay early to build credibility
• Ask for higher limits after 6–12 months of on-time payments
• Use supplier terms + a line of credit as backup (best of both worlds)

Working Capital for Contractors with Bad Credit

Banks typically want 680+ credit scores and 2+ years of financial statements. But alternative lenders exist who focus on revenue, contracts, and cash flow rather than perfect credit. If you have challenged credit or you’re a newer contractor, here are your options.

Revenue-Based Lenders (Credit Score 550+)

These lenders focus on bank deposits and revenue, not credit history. If you’re doing $40K+ per month consistently, you can often qualify with 550–600 credit. Reality check: this is expensive. Borrow $30,000, repay $40,000–$45,000. But it can keep jobs moving when banks say no.

Invoice Factoring (Customer Credit Matters More)

Factoring companies care more about your customer’s creditworthiness than yours. If you have invoices from creditworthy commercial clients, you can factor even with poor personal credit. The trade-off is cost and potential customer notification.

Equipment Financing with Larger Down Payment

This doesn’t create cash, but it preserves it. Example: need a $50,000 truck. With lower credit you may need 20% down ($10,000), but you preserve $40,000 of working capital versus paying $50,000 cash.

Personal Guarantee Working Capital

For newer contractors, some lenders will extend working capital if the owner has decent personal credit (often 650+) and provides a personal guarantee. Risk: personal assets can be at stake if the business can’t repay, so understand the implications.

For more on improving eligibility over time, see our guide to building business credit fast.

How to Qualify for Contractor Working Capital

Working capital lenders evaluate contractors differently than office businesses. Here’s what they look for and how to position yourself for approval.

What Working Capital Lenders Want to See

• Time in business: 6+ months minimum for many programs; 2+ years for best rates
• Monthly revenue: $25K+ per month often minimum; $50K+ opens more options
• Bank account health: no NSF fees in the last 90 days; positive balances; consistent deposits
• Credit score: ~600+ for term loans; ~640+ for lines; ~550+ for revenue-based options
• Existing debt: ability to handle current payments plus a new one
• Contracts/pipeline: backlog and active jobs help your case

Documents You’ll Need

• 3–6 months business bank statements (most important)
• Driver’s license
• Business license / contractor’s license
• Voided business check
• Schedule of contracts / work-in-progress (helps a lot)
• Aging receivables report
• Profit & Loss statement (informal is often OK for fast programs)
• Tax returns (usually required for SBA/traditional programs)

Red Flags That Hurt Approval

• NSF fees in the last 3 months
• Negative bank balances
• Inconsistent revenue patterns
• Too much existing debt relative to revenue
• Recent bankruptcies (many want 2+ years since discharge)
• Tax liens or judgments without a plan

How to Improve Your Approval Odds

• Clean up your bank account: eliminate NSFs and maintain a cushion for 90+ days
• Show contracts in hand: “I have $280,000 in signed work over the next 90 days”
• Be ready to explain credit issues honestly and briefly
• Be specific about use of funds: “$40K for materials for these three jobs”
• Work with a broker who knows contractor-friendly lenders

Contractor Working Capital Options Compared Side-by-Side

Which Working Capital Option for Which Situation

Contractor Working Capital Frequently Asked Questions

How Our Free Matching Service Works

CommercialLendingBroker.com is a free matching service. We’re not a lender. We connect contractors with lenders and brokers in our network who understand construction payment cycles and offer working capital, factoring, lines of credit, and fast funding when needed.

Step 1: You Tell Us What You Need

Fill out our simple form with your cash flow challenge, business info, and timeline. This takes 2–3 minutes. We don’t pull your credit at this stage.

Step 2: We Connect You With Contractor-Specialized Lenders

Based on your situation, we connect you with 2–4 lenders from our network who work with contractors. This can include working capital providers, invoice factoring companies, line of credit lenders, and revenue-based lenders.

Step 3: You Compare and Choose

Lenders reach out with quotes. You compare terms, ask questions, and choose what works best. Our service is free—lenders pay us, not you. You’re never obligated to accept any offer.