A construction company can be profitable on every job in its backlog and still miss payroll on Friday. The money is owed to you — it is just sitting in retainage, in a general contractor's accounts payable queue, or in materials already delivered to a site you have not been paid for yet. That gap, not lack of demand, is what actually kills contractors. Trade partners feel it first: material suppliers want payment on delivery while your invoices wait their turn in someone else's system, and the distance between those two moments is where contract financing either works or does not.
So treat this as a practical guide to closing the gap. Below: what the timing problem really is, the financing options that address it, how to choose without overleveraging, and a checklist to complete before you ever fill out an application. One assumption up front: most contractors reading this are making money on the work itself. The problem being solved is timing — when money arrives versus when it leaves — and every option below is judged on how well it bridges that gap without building a new one.
The Problem: Cash Timing, Not Profitability
Construction billing works in an order that punishes the party with the least cash. You mobilize with your own money — labor, materials, permits — and bill as work progresses. A general contractor commonly pays 30 to 60 days after your billing, and under pay-when-paid clauses, possibly later than that. Retention of 5–10% sits with the owner until punch list and closeout, which can mean months after your crew has moved on. On a $500,000 job, retainage alone can hold up $50,000.
Layer on seasonality — weather that stops work but not insurance premiums — and you get the classic pattern: a contractor with a strong backlog running a six-figure hole in the middle of the busiest season. The tell is timing: if the busiest month still runs a gap, the issue is collections across the whole book, not the weather. That hole is fixable with the right facilities. Fixed with the wrong ones, it becomes chronic debt.
Growth makes it worse before it makes it better. A contractor who doubles billing typically needs more working capital at the exact moment revenue climbs, because payroll, materials, and equipment all precede the collections. Lenders see the pattern constantly: record revenue and record strain in the same quarter. Revenue is the scoreboard; cash is the oxygen.
Walk a simple version. A contractor billing $150,000 a month with a 30-day collection lag needs on the order of a month of costs in float — commonly $120,000 to $150,000 — just to stand still, and considerably more in a growth quarter when new job costs land before the old jobs pay. Contract language decides how enforceable that float really is: pay-when-paid and pay-if-paid clauses control when you can collect, and what you can finance depends on what you can enforce.
Your Options, Matched to the Gap
Each facility below exists because a specific gap kept breaking the same way. Match the tool to the failure pattern.
A business line of credit covers the moving target: materials, weekly payroll, and the draws between progress payments. It revolves — you borrow against it, pay it down when checks arrive, and borrow again. If you want one tool for the day-to-day hole, this is it. See how business lines of credit are structured for contractors. Sizing rule of thumb: one to two months of average revenue for steady billing, more for material-heavy work. Lenders set the ceiling from your receivables aging and backlog — and they will re-read both at renewal.
A working capital term loan fits the slower, structural gap: the pre-season equipment prep, the winter slowdown, the retainage that follows you into the first quarter. Predictable monthly payments suit a need you can forecast. A working capital loan and a line solve different problems — the mistake is using one for the other's job. Terms commonly run one to five years with level payments; pair one with a spring ramp-up and it behaves like a budget line item.
Equipment financing keeps the iron working without draining cash. Excavators, skid steers, trucks, and trailers commonly finance at 80–100% of cost when new and against appraisal when used, with terms stretching five to seven years on machines that have that kind of service life. Payments follow the asset instead of the calendar. Our equipment financing page covers what lenders look at when the collateral is a machine. Used iron against appraisal commonly advances at 70–80% — the machine's resale market is the lender's second exit, and brands with deep parts networks hold value best. Seasonal contractors sometimes schedule deliveries in slow months so payments start before the work does; arrange that with the dealer and the lender up front.
SBA 7(a) and 504 loans are for the big rocks — owner-occupied property, a yard, a shop, an office. The 504 structure commonly pairs a bank loan with a CDC loan for up to 90% financing of the project; 7(a) handles up to $5 million across many uses that do not fit neatly elsewhere. When the property is part of the growth plan, this is where to look. More on parameters at SBA loans. The 7(a) program also carries acquisitions and partner buyouts, which come up often in trades with aging ownership — a funded path to buying out a retiring partner instead of dissolving a company that works.
Receivables financing advances cash against invoices you have already issued, typically a majority of face value, at a cost that reflects the speed. Valuable during a cash crunch; expensive as a permanent strategy. One thing to confirm before signing: who carries collection risk. With recourse, the burden stays with you; without it, the advance company prices that risk into the cost.
Comparing the Options
| Facility | Best for | Typical structure | How fast it commonly funds |
|---|---|---|---|
| Business line of credit | Materials, payroll, draw gaps | Revolving; pay for what you use | Days to a few weeks |
| Working capital loan | Seasonal gaps, retainage carry | Term of 1–5 years, monthly payments | One to four weeks |
| Equipment financing | Trucks, excavators, heavy tools | 80–100% of new equipment; 5–7 year terms | Days to two weeks |
| SBA 7(a) / 504 | Property, expansion, larger needs | 7(a) up to $5M; 504 up to 90% financing | Commonly 45–90 days |
| Receivables financing | Post-invoice cash gaps | Advances against A/R | Days |
Costs vary by institution and structure, so weigh each offer against the specific job: all-in dollars, speed to fund, and how the facility behaves at renewal.
Choosing Without Overleveraging
Four rules keep contractors out of trouble.
Match the money to the life of the need. Do not fund a five-year asset with twelve-month money — that is how a solvency problem gets built one rollover at a time. Materials that turn in 60 days can go on a line; a truck cannot.
Run the coverage math before the lender does. Add the new payment to everything else you owe and stack it against average monthly gross profit. Lenders commonly want 1.25x coverage or better, and if your seasonality is extreme, they will look at the weak months, not the strong ones. A payment that only works in July is a payment that does not work.
Watch the bonding interaction. Surety underwriters read your balance sheet, and heavy short-term debt can reduce bonding capacity even when it solves this month's cash hole. Debt that fixes today and shrinks your bid ceiling tomorrow is not a fix. When the two conflict, prioritize the structure a surety can live with — and when property is involved, weigh it through the SBA loans framework above rather than stacking more short-term debt.
Keep the lender count sane. Two or three facilities at institutions that can see the whole picture beat six fragmented accounts. In a slowdown, the lender who knows your season and your backlog is the one who works with you instead of tightening the line.
One more habit: keep the line actually revolving. Paying it down when checks arrive is what separates a working tool from a debt spiral. A line that stays fully drawn for a year is a term loan in disguise — at a worse rate and with no repayment rhythm. And time the ask before you need it: application quality collapses under deadline pressure, so build facilities in calm quarters and draw them in hard ones.
The biggest structural mistake shows up at renewal time: rolling short-term facilities over a burden that term money should carry. A gap that has appeared three years running is not a gap — it is a capital need, and it wants term debt.
One sizing habit: ask for what the last twelve months of statements can support, then grow the facility with demonstrated performance. An over-sized line invites over-use; an under-sized one strands jobs.
Before You Apply: A Checklist
Work top to bottom; it is ordered the way lenders typically ask.
- Updated WIP schedule. Work in progress, by job, with costs to date and remaining billings. This is the first document a construction lender asks for.
- Two years of business tax returns and year-to-date financials. Current within 90 days if possible.
- A/R aging with explanations. Flag anything past 60 days and note the plan for it; surprises discovered by the lender cost more than ones you disclose.
- Equipment list with serial numbers, ages, and realistic values. Needed for both equipment financing and collateral discussions.
- Backlog summary by contract, including retainage exposure and expected completion dates.
- Entity documents, licenses, insurance certificates, and bond capacity letters.
- Your personal credit pulled and reviewed before a lender sees it — so you can address anything old or explainable on your terms.
- Your own numbers. DSCR with the new payment included, and a 24-month look at your seasonality pattern. Knowing your weak quarter is a position of strength.
- A one-page uses-and-sources summary. How much you need, where it goes, and what repays it — files that arrive self-explained get read faster.
- Your surety's input before submission, so financing and bonding strategy move in the same direction.
- A cash-flow calendar — billings, payrolls, supplier terms, and insurance dates on one page, so the timing gaps are visible before they are urgent.
If your backlog is stronger than your bank balance, that is a solvable problem — it is what working capital lenders solve every season. Send Tesni, LLC your WIP schedule through our contact page and we will point you to the structure that fits the hole instead of widening it.