Construction Business Loans: Funding Contractors Between Draws

The construction cash flow problem

Contractors pay for labor and materials weeks or months before a draw request is approved, and 5–10% retainage is held until project completion. Even profitable contractors run short of cash mid-project. Construction is also one of the harder industries for traditional underwriting because deposits arrive in large, irregular lumps rather than steady daily sales.

Products that fit construction

• Business line of credit: the best tool for recurring draw gaps — borrow for materials, repay when the draw lands, repeat.
• Equipment financing: excavators, skid steers, trucks, trailers — 100% financing common, 3–7 year terms, Section 179 eligible.
• Invoice or contract financing: advances against approved pay apps and signed contracts (specialized construction factors handle progress billing).
• Revenue-based financing: available, but weekly payments fit construction better than daily — ask for weekly remittance.
• SBA 7(a): for established contractors buying out partners, acquiring a competitor, or purchasing a yard or shop.
• Material supplier terms: net-30/60 with suppliers is free financing; many extend limits with a strong payment history.

What underwriters want to see from a contractor

• Signed contracts and a backlog schedule — future revenue is the strongest evidence.
• Accounts receivable aging and retainage schedule.
• Bank statements showing large deposits matched to invoices or draw requests.
• General liability insurance and, for larger deals, bonding capacity.
• Specialty trade licenses in good standing.
• A clear explanation for months with zero deposits (between projects).

Typical amounts and terms

A contractor averaging $150,000 per month in deposits, even if lumpy, typically qualifies for a $75,000–$200,000 line of credit with 12+ months of history, or $100,000–$200,000 in revenue-based financing sooner. Equipment deals are sized to the asset and frequently exceed $250,000 for heavy machinery.

Avoiding common mistakes

• Do not fund a 7-year excavator with a 6-month advance — use equipment financing.
• Match repayment to your draw schedule; weekly or monthly beats daily for construction.
• Keep project funds separate if you work on bonded or public jobs with trust-fund requirements.
• Apply when you have a signed contract in hand; underwriters fund backlog more readily than hope.