GCs, subs, specialty trades
Contractor financing for the gap between draws
Contractors do not have a profit problem, they have a timing problem. Materials and payroll go out weekly; draws land on a schedule set by someone else, often 30 to 90 days after the work is done. Most contractor files are solved with working capital or a line of credit sized to cover one full draw cycle, underwritten on bank deposits rather than the balance sheet.
Retainage and the draw schedule
Two structural features of construction make it hard to finance conventionally.
First, the draw schedule. You perform, you submit, the architect or owner certifies, and then you get paid — on their calendar. Meanwhile your crew gets paid on Friday and the supply house wants their money in 30 days.
Second, retainage. Five to ten percent of every contract is held back until the job closes out, sometimes long after. On a book of business worth $2 million, that is $100,000 to $200,000 of your own money you cannot touch, sitting on your balance sheet as an asset a bank will not lend against.
That is why profitable contractors run short of cash. It is a mechanical feature of the industry, not a warning sign.
When contractors actually need money
Mobilisation. Winning a job costs money before it earns any. Materials, permits, bonding, and crew ramp-up all precede the first draw.
Payroll between draws. The most common single reason, and the least discretionary.
Taking a bigger job. The job you cannot afford to start is the job that would change the business. This is the real cost of being undercapitalised.
Seasonal shutdown. In the Northeast, winter compresses the schedule and cash flow with it.
What usually fits
Working capital
A lump sum repaid on a fixed schedule. The default answer when you need money for a specific thing with a known end date.
Most flexibleBusiness line of credit
Revolving credit you draw and repay as needed. Costs less over a year than repeated lump sums for the same problem.
Lowest costEquipment financing
The machine secures the deal, so the rate drops. Almost always the cheapest option when the money has a serial number attached.
For slow-paying customersInvoice factoring
Sell your receivables at a discount and get paid now. Usually cheaper than an advance when the problem is slow-paying customers.
A line of credit is usually the right long-term shape for a contractor, because you draw for mobilisation and repay at the draw — you pay for the money only while you are using it. Term working capital fits better for a single known gap with a known end date.
What funders look at in this trade
| What they check | What helps you | What hurts you |
|---|---|---|
| Deposit pattern | Regular draws landing across the months reviewed | One enormous deposit and then nothing for six weeks |
| Customer concentration | Multiple GCs or owners | A single GC producing nearly all revenue |
| Licensing | Current licence in every jurisdiction you work | Expired or pending licence — a hard stop with many partners |
| Liens and judgments | Clean record | Mechanics liens filed against you, or open judgments |
| Work in progress | Documented schedule of values and aging | No documentation of what is actually owed to you |
| Existing positions | Disclosed | An undisclosed advance found in the statements |
What this looks like in practice
A specialty subcontractor with eleven employees, in business six years, averaging $118,000 a month in deposits. Deposits are lumpy by nature — some months show $210,000, others show $40,000, because draws land when they land.
The company is offered a job worth roughly $400,000 with a 90-day first draw. Mobilisation, materials and eight weeks of payroll come to about $95,000 before a dollar arrives.
The lumpiness is the underwriting issue. A funder reading three months of statements sees volatility and prices for risk. The fix is documentation: a schedule of values, the aging report, and the signed contract turn what looks like volatility into a visible, explainable cycle.
This is the difference between a repriced file and a clean one. The numbers do not change. What changes is whether the funder can see why they look the way they do.
Example only. Actual rates, terms and outcomes are set by the funding partner and depend on your business.
Documents to have ready
- Three to six months of business bank statements as PDFs
- Current contractor licence for every jurisdiction
- Accounts receivable aging report
- Schedule of values or signed contract for the job being funded
- Certificate of insurance and any bonding documentation
- Voided check, EIN letter, driver's licence
Straight answers
My deposits are very uneven month to month. Does that disqualify me?
No, but it changes how the file is read. Uneven deposits are normal in construction and experienced funders know it. What helps is documentation — an aging report and a schedule of values turn apparent volatility into a visible cycle.
Can I get funding against retainage?
Retainage is difficult to finance directly because the release date is uncertain and often contested. It is more common to size a working capital facility with the retainage balance in view rather than lend against it specifically.
Do funders care about my bonding capacity?
Not usually as a decision factor, but bonding does show a third party has already vetted your finances, which helps. If you are bonded, put it in the file.
What if a mechanics lien has been filed against one of my jobs?
Disclose it immediately. Liens surface in due diligence and a discovered lien is far worse than a disclosed one. Many are routine disputes that get resolved; funders mainly want to know whether you knew about it.