Most contractors finance a construction business with four kinds of funding, and each one covers a different gap. A line of credit carries payroll and materials through the weeks between starting a phase of work and collecting the progress payment for it, which makes it the closest fit for retainage and slow-paying general contractors. Equipment financing pays for an excavator, a lift or a work truck, with the machine itself as security. Revenue-based financing, often called a merchant cash advance, covers a short, specific need within a day or two and is repaid as a share of deposits. SBA and bank loans take weeks but offer the longest terms, for a yard, a shop or a large fleet purchase. Which one fits depends on how long your money will be out before the job pays it back.
Below, we cover how each kind of contractor financing works around draws, retainage, winter and bigger bids. Our construction funding page has a shorter overview.
Why contractors run short on profitable jobs
A construction job starts with money going out. Materials are often paid for before they are installed, the first payroll runs at the end of the first week, and rented equipment bills every month. The money comes back through progress payments, also called draws, which are billed after a stretch of work is finished and paid once the owner or general contractor approves the request. On federal jobs, the Federal Acquisition Regulation sets the government's due date for a progress payment at the 14th day after a proper payment request and requires the prime contractor to pay its subcontractors within 7 days of being paid. Private contracts set their own terms, and a subcontractor two tiers below the owner is often waiting on every tier above it.
Retainage stretches the wait further. The owner holds back a percentage of each progress payment until the job is finished and accepted, as security that the work will be completed. On federal construction contracts, FAR 32.103 says retainage may not exceed 10 percent of the approved amount and must be paid promptly once every contract requirement is complete. Private contracts and state rules differ, so the percentage and release date on your jobs are whatever your contracts say.
Here is how that plays out on an example job. A subcontractor takes on a $400,000 job that runs four months and costs $340,000 to perform. It spends $120,000 in the first month, mostly on materials, then $80,000, $80,000 and $60,000. It bills $100,000 at the end of each month and is paid 30 days later, less 10% retainage, so each payment is $90,000. The business is $120,000 out of pocket after the first month and still $70,000 behind when the work wraps up, and the last $40,000 of retainage arrives a month or two after that. The job earns $60,000, yet for most of its life the contractor is the one financing it.
The strain is common well beyond construction. In the Small Business Credit Survey's 2025 Report on Employer Firms, published by the Federal Reserve Banks, 56% of small employer firms named paying operating expenses as a financial challenge and 51% named uneven cash flow, a category that includes collecting on receivables. A contractor with a full, profitable backlog can sit in both groups at once.
Winter, weather and the seasonal swing
In much of the country, construction work follows the weather. In the Census Bureau's construction spending figures before seasonal adjustment, the value of construction put in place in the United States was about $161 billion in January 2025 and $207 billion in August, so January came in roughly 22% below the August peak. Crews follow the same curve, and Bureau of Labor Statistics figures for construction employment, not seasonally adjusted, rose from about 7.94 million workers in January 2025 to 8.48 million in July.
Those national numbers blend warm states with cold ones, so a roofer in Minnesota can see a much deeper winter drop. Spring brings new hires and materials for several jobs at once, while the payments for that work arrive in early summer, and winter still carries insurance, truck payments and a core crew. A business that is profitable over twelve months can run short in March, so the easiest time to arrange working capital for the season is before it starts.
The main ways to finance a construction business
A line of credit for the gap between draws
A line of credit gives you a limit, up to $250,000 through our network, and you draw only what you need when you need it. You repay what you drew on a weekly or monthly schedule, and as you repay, that room opens up again without a new application. You draw when a materials invoice or a payroll comes due and pay the balance down when the progress payment lands, so you pay only on what is out, and only while a job is waiting on it. In the example above, a line that covered the $120,000 peak would carry the job through month four and be paid off by the draw in month five. Our line of credit page covers limits and repayment, and our guide to how a business line of credit works goes into draws and costs.
Equipment financing for machines, trucks and trailers
Equipment financing pays for a specific machine and uses that machine as security. Excavators, skid steers, scissor lifts, dump trucks, trailers and work vans are typical examples, and offers usually come back within one to two business days. Because the funder can recover the equipment if payments stop, approvals tend to come more easily than for unsecured credit. In the Fed's 2025 report, 68% of applicants for auto or equipment loans were fully approved, the highest rate of any product in the survey, compared with 47% for business lines of credit and 33% for merchant cash advances. Before buying, ask whether the machine will stay busy enough to beat what you spend on rentals. Our equipment financing page lists what it covers, and our guide to how equipment financing works explains the terms in more depth.
Revenue-based financing for short, specific needs
With revenue-based financing, a funder buys a share of your future revenue at a discount. It pays you a lump sum now and collects a larger fixed total through daily or weekly debits from your business account until that total is reached. Advances arranged through us range from $5,000 to $2,000,000, typically fund in one to two business days, and usually need no collateral. They are priced with a factor rate rather than an interest rate, so as an example, a factor rate of 1.30 on a $60,000 advance means $78,000 paid back in total.
For a contractor, the timing matters. Payments usually start within days of funding, while the next progress payment may be a month or more away, so an advance fits best when the money comes back quickly, such as a materials deposit on a job billing next week or a repair on a machine that is holding up a crew. Our revenue-based financing page covers amounts and timing.
SBA and bank loans for the yard, the shop and the fleet
SBA and bank loans take weeks and ask for tax returns, a personal financial statement and a schedule of your existing debts, and in return they offer the longest terms. The SBA's 7(a) program lends up to $5 million for working capital, machinery and equipment, and buying or improving real estate. Within 7(a), the SBA's CAPLines are built for short-term and cyclical working capital, and the Contract CAPLine finances the costs of one or more specific contracts, including the overhead allocated to them. These loans suit a yard, a shop building or a large fleet purchase, though only 32% of SBA loan applicants in the Fed survey were fully approved. Our SBA and bank loans page lists what lenders ask for.
Slow-paying general contractors and retainage
When a general contractor pays slowly, financing can carry the wait, but some of the fix is in the paperwork. In our experience, pay applications that go in complete and on time, with the lien waivers the general contractor needs, come back paid sooner than ones that bounce for corrections. Pricing the payment and retainage terms into your bid puts the cost of carrying the job into the number instead of your margin.
Invoice factoring is the other common answer to slow payers. A factoring company buys your unpaid invoices at a discount, advances most of their value right away and collects from your customer directly. We do not arrange factoring, but specialist factoring companies do, and if you look into it, ask how the factor treats retainage.
Bonding and bidding on bigger jobs
Moving up to larger jobs usually takes a surety bond and more working capital at the same time. According to the SBA, many public and private contracts require surety bonds, and the agency guarantees bid, payment and performance bonds issued by participating surety companies for small businesses that might not meet other sureties' criteria. Its program covers contracts up to $9 million for non-federal work and $14 million for federal work, with a guarantee fee of 0.6% of the contract price on performance and payment bonds and no fee on bid bonds. The surety still has to approve the business on credit, capacity and character. We do not provide surety bonds, which come from a surety company through a bond agent.
We arrange the working capital behind the bid. A bigger job means a bigger mobilization cost and a longer stretch before the first draw, so a line of credit arranged before you bid covers the first months of payroll and materials before you commit to a price.
What funders look at in a construction file
Every funder sets its own thresholds, and they vary widely. Most prequalify from your last four months of business bank statements. A contractor's deposits arrive as a few large progress payments, so funders look at monthly totals, the gaps between deposits, how low the balance runs and what other debits come out of it. Some funders treat construction as contract-dependent, while others specialize in contractors, and sending the file to the right ones with the signed contracts and draw schedule shows them how the money comes back.
Credit matters more to some funders than to others. If you are looking for financing for contractors with bad credit, a low score narrows the list of funders rather than ending the search. Equipment financing is often the easiest place to start, since the machine secures it, and revenue-based funders give real weight to steady deposits. Our guide to qualifying for a merchant cash advance goes through the requirements.
What contractors use financing for
| Need | What tends to fit | Why |
|---|---|---|
| Materials and payroll before the first draw | A line of credit | You draw before the progress payment arrives and repay when it lands. |
| Retainage held on finished jobs | A line of credit | The money is already earned, so a short draw can cover the wait until it is released. |
| An excavator, skid steer or work truck | Equipment financing | The machine secures the financing, and payments run over a term closer to its working life. |
| A broken machine holding up a crew | Revenue-based financing or equipment financing | The money arrives in a day or two, and every idle day still costs payroll. |
| Mobilizing a larger bonded job | A line of credit arranged before the bid | The early months of labor and materials are covered before you commit to a price. |
| A yard, shop or office building | An SBA or bank loan | Property serves the business for decades, so a long term keeps the payment small. |
Mistakes that cost contractors the most
The costliest mistake we see is using daily-debit money to carry a long job. An advance starts collecting within days, while the job it paid for may not bill for a month, so the debits come out of other jobs' payments. If that leads to a second advance to cover the first, the business ends up stacking, with several debits on one account and each new offer usually priced higher. If you already carry more than one, consolidation can replace them with one weekly or monthly payment on a longer term, though the total cost may not go down.
The second mistake is counting retainage as cash. It is earned, but it arrives on the owner's schedule, and a cash plan that treats it as money in the bank tends to come up short right when the next job starts. The third is signing the first offer without comparing it, since offers on the same file can differ in total payback, payment frequency and early payoff terms, and a weekly payment can leave more room between draws than a slightly cheaper daily one.
How to apply for construction financing
- Fill out the short application with your monthly revenue, time in business and what the money is for. There is nothing to pay to apply or to see offers, and no obligation to accept one.
- Add your last four months of business bank statements, by uploading them or connecting your bank read-only, along with current contracts and draw schedules if you have them.
- We send your file to the funders that fund contractors and go through their offers with you side by side before anything is signed.
- Most applicants are funded within one to two business days of choosing an offer, and some the same day. SBA and bank loans take several weeks.
Tell us what the money is for, because a materials gap and a new excavator call for different products. Our construction industry page shows how we work with builders and trades, and you can call us at (818) 351-0225 to talk it through first.
Questions contractors ask about financing
What is the best type of loan for a construction business?
For most contractors, a line of credit fits the day-to-day gap between paying for materials and payroll and collecting progress payments, while equipment financing suits machines and trucks and SBA or bank loans suit property and large long-term purchases.
Can a contractor get financing with bad credit?
Many can, though with fewer options, because equipment financing is secured by the machine and revenue-based funders build most of their decision from bank statements, so a low score narrows the list of funders rather than ending the search.
How do you finance construction equipment?
Most contractors use equipment financing, which uses the excavator, lift or truck as security and usually produces offers within one to two business days, and for large purchases that can wait a few weeks, an SBA 7(a) or bank loan offers longer terms and smaller payments.
Does Today Capital Group provide surety bonds?
No, surety bonds come from surety companies through bond agents, and the SBA guarantees certain bonds for small businesses, while we arrange the working capital and equipment financing a larger bonded job often needs.
Does applying for contractor financing hurt my credit score?
Getting matched with funders does not need a hard credit pull, since most funders prequalify from bank statements and a soft pull, and if a funder runs a hard pull in final underwriting, you will know before it does.
