How should a contractor fund the gap between buying materials and getting paid?

Why do construction businesses run short of cash on profitable jobs?

Because the money goes out long before it comes in. A framing subcontractor may buy lumber, pay a crew weekly and rent a lift for a month before submitting the first pay application. Then the general contractor pays when the owner pays, a portion is held as retainage, and change orders wait for sign-off.

The common pressure points on project work:

• Mobilization costs before the first draw is approved.
• Pay-when-paid terms that push your payment behind the owner's.
• Retainage held back until substantial completion or closeout.
• Unapproved change orders, where work is done but not yet billable.
• Bid season, when you commit to several jobs at once.

A growing backlog can make this worse, not better, because every new job adds upfront spending.

Which funding products tend to fit contractors?

A line of credit fits recurring gaps between pay applications because you draw and repay job by job. Equipment financing fits excavators, skid steers, trailers and work trucks that earn for years. Short-term working capital can bridge a single job's materials when a signed contract and a clear payment schedule back it up.

• Line of credit: recurring materials and payroll gaps across several jobs.
• Equipment financing: machines and vehicles, with the equipment as collateral.
• Working capital: one job's mobilization when payment is scheduled.
• Term loan: a planned investment such as a yard or shop.

When should a contractor avoid short-term funding?

Avoid it when repayment depends on money you have not been promised in writing: a disputed change order, a job that is not yet awarded or retainage with no release date. Fixed daily debits are especially risky in construction because pay applications are lumpy, and an owner's late payment can leave weeks with no deposits at all.

Before signing, lay the payment schedule next to your realistic billing calendar, including the slowest stretch. If there is a gap longer than your account can carry, choose a product with monthly payments or a revolving structure instead.

Which contract terms matter most on construction funding?

A blanket UCC lien matters most, because your receivables are your pay applications. If a funder's lien covers all accounts receivable, another funder may be unwilling to advance against the same billings. The personal guarantee and default triggers, such as changing bank accounts or taking other funding, deserve the next closest reading.

• What a UCC-1 lien covers, and whether it reaches your receivables and equipment.
• What you personally sign for.
• Whether a merchant cash advance offers reconciliation when billings slow.

Bonding, lien rights on projects and licensing are separate matters; check with your surety, your attorney or the official licensing agency. This is general information, not legal advice.

What do funders look at for a construction business?

Many funders review recent bank statements for deposit patterns, the business's time operating, credit and existing obligations. For contractors, a list of active contracts or a work-in-progress summary can help explain lumpy deposits. Requirements vary by product and funder; many look at time in business, monthly revenue and credit.

Explain seasonality and large one-off deposits upfront, so a big draw followed by a quiet month is read in context.

Updated September 14, 2026 · TrustedBizFunder Funding Team