You won the bid. Now you need crews, materials, and equipment on site before the first draw ever hits your account — and once it does, 5-10% of it gets held back as retainage until the job is done. This guide covers every real funding tool for construction: what each one costs, who approves fast, and the mistakes that get contractors declined. Want the short version matched to your trade? Start at our construction funding page.
The contractor cash-flow problem, in one sentence
You front the mobilization costs — crew, equipment, materials, permits — before the first payment ever lands, and once draws start coming in, the GC or owner holds back retainage until substantial completion, sometimes for months after your part of the job is finished. Win a bigger job and the squeeze gets worse, not better: more mobilization cash out the door, more money parked in retainage you can't touch. Every funding product below exists to close that gap.
Your five real funding options
1. Equipment financing — excavators, skid steers, trucks
The equipment itself is the collateral, which makes this the most accessible funding type for contractors — including newer companies. Lenders weight your down payment, the equipment's age and resale value, your trade experience, and revenue more than a long track record. It also means you're not tying up working capital in a purchase you could finance instead.
2. Pay-application factoring — the construction cash-flow workhorse
You sell an approved, unpaid pay application to a factoring company and get most of the money in a few days instead of waiting 30-90 days on the GC or owner. Approval leans heavily on who owes you, not just your own financials — which is why it works for newer contractors with a creditworthy GC on the other end of the invoice.
3. Working capital / mobilization funding
Fast cash, often within days, repaid from future revenue. It's the most expensive money on this list, and its real job is covering a specific, short-term gap — mobilizing for a new job before the first draw, a repair that gets equipment back on a job site, materials for a job you already have signed. It's the wrong tool for a permanent hole where retainage or pay-app factoring should be doing the work every month.
4. Business line of credit
A revolving limit you draw only when needed and pay interest only on what you use — the cheapest flexible cushion once you can qualify. Compared to a business credit card, a line of credit typically carries a lower rate and a higher limit, but takes longer to set up; a card is faster to open but gets expensive fast if you carry a balance between draws.
5. SBA loans — the long game
Lowest rates, longest terms, slowest process (weeks to months), and the most paperwork. Best for established contractors making a real capital move: buying a yard, a fleet of owned equipment instead of leasing, or acquiring another company.
Which tool for which problem
| Your situation | First tool to look at | Typical speed |
|---|---|---|
| Mobilizing for a new job before the first draw | Working capital | Days |
| GC pays on a 60-90 day cycle, payroll's due Friday | Pay-app factoring | A few days per invoice |
| Adding an excavator, skid steer, or truck | Equipment financing | Days to 2 weeks |
| Want a cushion before you need it | Line of credit | 1–3 weeks |
| Buying a yard or another company | SBA loan | Weeks to months |
What lenders actually check (it's not just your credit score)
- Bank statements — usually the last three to six months. Daily balances and how often the account dips negative matter more than a mediocre credit score.
- Backlog and contract value. Signed jobs on the books tell a lender more about your near-term revenue than last year's tax return.
- Who you're working for. A pay app owed by a large, reliable GC underwrites very differently than one owed by an unknown developer.
- Existing debt positions and retainage exposure. Lenders want to know how much of your receivables are already tied up before they add more.
- The story. A one-paragraph explanation — "mobilizing crew for a signed $400K commercial buildout, draw #1 in 30 days" — moves underwriters more than owners expect.
The three mistakes that get contractors declined
1. Mixing job costs and general operating cash. If mobilization costs for Job A quietly get paid out of Job B's draw, no lender or bonding company can cleanly verify what any single job actually earned.
2. Waiting until payroll is due to look for funding. Equipment financing and lines of credit take days to weeks to approve. Contractors who wait for the emergency end up stuck with the most expensive short-term products by default, not by choice.
3. Ignoring retainage in cash-flow planning. Treating retainage as "spent" money the day the draw is approved, instead of money you won't actually touch for months, is how profitable contractors still run out of cash.
Common questions
Why won't banks lend to construction companies?
Revenue is lumpy and tied to project milestones instead of steady monthly income, and one bad job can wipe out a thin-margin year. Equipment financing and pay-app factoring work around this by relying on collateral or receivables instead of a clean, steady bank statement history.
How do contractors cover payroll between draws?
Most use a mix: a line of credit as a standing cushion, equipment financing instead of tying up cash in a purchase, and pay-app factoring when a specific draw is running late. Set these up before an emergency — approval takes time you won't have on payroll day.
What is retainage and how do you finance around it?
Retainage is the 5-10% of each pay application withheld until substantial completion, sometimes months after your work is done. Some factoring and working capital lenders will advance against retainage receivables specifically, freeing up cash that's earned but not yet collectible.
Can a new construction company get equipment financing?
Yes, more easily than most funding types — the equipment is the collateral. Lenders weight down payment, equipment age and resale value, and trade experience more than time in business.