Construction carries one of the heaviest working capital burdens of any industry. Contractors mobilise, buy materials and run payroll before submitting a draw, then wait for inspection and approval — and even then, a percentage is held back as retainage until final completion.
Why growth makes it worse
A larger project requires a proportionally larger outlay before any payment arrives. A contractor who wins two substantial jobs in the same month faces the tightest cash position of the year at precisely the moment the business looks strongest. This is the central reason profitable contractors seek financing.
The four gaps to plan for
- Mobilisation. Permits, materials, rentals and the first weeks of labour, all before draw one.
- Draw approval lag. Submission is not payment; inspection and processing add weeks.
- Retainage. Five to ten percent of each payment held until closeout, sometimes months after the crew leaves.
- Change orders. Work performed to protect the schedule, paid only once the paperwork catches up.
Which structure fits
A line of credit maps most closely onto how contracting works: draw at mobilisation, repay when the progress payment clears, and keep the limit available for the next job. Because the need repeats, a revolving facility is usually far cheaper across a year than repeated one-off financing.
Keep equipment separate. Financing an excavator through equipment financing — secured by the machine, over a term matched to its life — preserves your working capital facility for payroll and materials. Larger fixed investments such as a yard or shop suit a term loan or SBA financing.
Documentation that strengthens a construction application
Bring a work-in-progress schedule showing each job, contract value and percentage complete, plus an accounts receivable ageing report that separates retainage from ordinary receivables. Together these demonstrate that a cash gap is a timing issue backed by contracted revenue, which is a materially different story from a business simply running short.
Questions to settle first
How much cash does each new project consume before the first draw? How much retainage is currently held across all jobs? Is your slow-paying exposure concentrated with one general contractor? And critically: does the financing close the whole gap, or only reach the next draw and create a new one? Undersized financing on a construction job tends to be the most expensive kind.