A general contractor can run $6 million through the business, have $900,000 in receivables, be busier than ever — and get declined. Not because the company is weak, but because a GC's financials look alarming to anyone who doesn't read construction for a living. Lumpy revenue, a top line that's mostly other people's money, thin net margins, and a balance sheet made of receivables and retainage instead of assets. Here's how the file actually gets underwritten, and which products fit a business that gets paid in draws.
Why a GC's file reads differently
Four structural facts about contracting drive almost every decision an underwriter makes:
- Revenue is lumpy. A big draw clears, then nothing for five weeks. A generalist lender averaging your bank statements sees volatility; you see a normal quarter.
- Most of the top line isn't yours. On a $6 million year, a large share is committed to subs and suppliers. Revenue size impresses nobody underwriting the file — cash left over does.
- Collateral is soft. Receivables and retainage dominate the balance sheet, and retainage is money you've earned that nobody will release until the job closes out.
- You pay before you get paid. Mobilization, materials, and payroll all land in front of the first draw. That's the actual reason most GCs borrow. We covered the front end specifically in financing mobilization costs.
None of that makes you unfundable. It makes you a file that needs an underwriter who has seen it before.
The WIP schedule decides it
Above roughly a million in revenue, the work-in-progress schedule is usually the most influential document in your application — more than the credit score, often more than the tax return. A WIP lists every open job with contract value, approved change orders, costs incurred to date, estimated cost to complete, percent complete, and amount billed. Three things get read out of it:
- Profit fade. Compare bid margin to current projected margin, job by job, period over period. Margins that quietly erode as jobs progress are the single biggest red flag in construction lending, because they suggest estimating or field control problems that no loan fixes.
- Underbillings. Costs and earned revenue in excess of billings — work performed that you haven't invoiced. It's an asset on paper and a hole in your bank account. Large or growing underbillings read as weak billing discipline, or as unapproved change orders you're funding yourself.
- Overbillings. Billings in excess of cost. Comfortable, because it's cash in your account — but it's not earned yet, and if you're using it to cover another job's costs, that's a warning sign underwriters are trained to catch. An overbilled backlog winding down means a cash squeeze is coming.
Bonding capacity and the loan you're about to take
This is the piece contractors most often learn the hard way. Sureties size a bonding program largely off working capital and net worth, so a new loan doesn't just add a payment — it moves the numbers your bonding is built on. Debt sitting in current liabilities, like a short-term note or a daily-remittance product, reduces working capital and can shrink the program you qualify for. Longer-amortization debt, or financing tied to a specific asset such as equipment, generally hits working capital less.
It's an avoidable mistake. If bonded work is part of your pipeline, loop in your surety agent before you sign, and make sure whoever is structuring the funding knows a bonding program is in play. Fast money that costs you a bid limit is not cheap money.
What actually fits contract revenue
| Product | What it solves | What to watch |
|---|---|---|
| Business line of credit | Draw-gap payroll and materials; repay when the draw clears | Usually the best fit and the hardest to get; expect real financials and a WIP |
| Invoice factoring | Turning approved pay applications into cash now | Retainage is typically excluded; watch the contract's assignment clause |
| Equipment financing | Iron, trucks, attachments — the asset is the collateral | Don't finance short-life assets over long terms |
| SBA 7(a) term loan | Working capital, expansion, acquisition, longer amortization | Slowest path; personal guarantees and collateral liens are standard |
| Short-term working capital | A specific, dated gap you can name | Fixed remittances against lumpy draws is how contractors get squeezed |
The line of credit is the honest answer for most GCs, precisely because it matches how the business breathes: borrow against the gap, repay when the draw clears, pay for what you use. Factoring is the workaround when the credit line isn't there yet — the mechanics are in invoice factoring for construction companies, and the broader cash-flow picture is in funding the gap between draws.
What gets a general contractor declined
- No WIP, or a WIP that contradicts the financials. Numbers that don't tie across documents stop a file cold.
- Job concentration. One general contractor or one owner representing most of your revenue is a single point of failure, and underwriters price it that way.
- Stacked short-term debt. Multiple advances with overlapping remittances signal distress and consume the cash flow a new lender was counting on.
- Cash-basis financials at scale. A multimillion-dollar contractor filing on the cash method gives an underwriter no way to see earned versus billed. Getting on percentage-of-completion is a conversation with your CPA, and it changes how your company reads.
The general underwriting factors behind all of this — time in business, deposit patterns, average daily balance, debt service coverage — are in what lenders actually check.
The file to have ready
Two to three years of business tax returns and financial statements, ideally percentage-of-completion; a current WIP schedule; AR and AP agings with retainage separated; three to six months of business bank statements; a schedule of completed jobs showing bid versus final margin; bonding and insurance information; and personal financial statements for the owners. Assembling that before you apply doesn't guarantee anything, but it is the difference between weeks of back-and-forth and a straight answer — and a fast, clear no on the wrong product is worth having early.
Common questions
Why is it harder for contractors to get loans?
Lumpy draw-based revenue, a top line that's largely pass-through to subs and suppliers, thin net margins, and collateral made of receivables and retainage. A lender unfamiliar with construction reads normal contracting as instability.
What is a WIP schedule?
A job-by-job listing of contract value, change orders, costs to date, cost to complete, percent complete, and amount billed. It shows a lender whether jobs are holding their margin and whether you've billed ahead of or behind the work.
Will a loan hurt my bonding capacity?
It can. Sureties size programs largely off working capital and net worth, so debt landing in current liabilities can shrink your bid limit. Talk to your surety agent before signing, not after.
What documents should I have ready?
Business returns and financials (percentage-of-completion preferred), a current WIP, AR/AP agings with retainage broken out, bank statements, a completed-jobs schedule, bonding and insurance info, and owner personal financial statements.