Industries
Construction Company Funding: Bridging Draws and Payroll
Construction cash flow is famously front-loaded. Materials, mobilization and payroll come first; progress draws arrive weeks later; retainage can sit for months after completion.
Where the gaps appear
- Mobilization and material purchase before the first draw
- Weekly payroll against monthly billing cycles
- Change orders funded before they are approved
- Retainage held for 5 to 10 percent until final acceptance
- Equipment downtime requiring immediate repair or rental
Matching product to gap
A line of credit is the ideal structure because draws and paybacks follow the rhythm of the job. Where a line is not yet available, short-term working capital covers a defined project gap, and invoice factoring converts approved pay applications into immediate cash.
Equipment financing handles machinery purchases without touching operating cash.
Underwriting considerations
Underwriters look at your backlog, the creditworthiness of the general contractors or owners paying you, your history of completing similar-sized jobs, and whether payments arrive in a predictable pattern.
A current work-in-progress schedule and AR aging report frequently increases approval size more than any other document.
Protecting your margin
Price the cost of capital into the bid. If a job requires $200,000 of financed materials for 90 days, that carrying cost belongs in the estimate, not in your net profit at the end.
Frequently asked questions
- Can I factor construction invoices?
- Yes, though construction factoring is specialized because of lien rights, progress billing and retainage. Work with a factor experienced in the trade.
- Does bonding affect funding options?
- It can. Surety relationships and existing liens are considered, so disclose them upfront.
- What about retainage?
- Some programs advance against retainage, usually at a lower advance rate given the longer collection horizon.