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Industry capital

Working capital for construction companies: retainage, mobilization, and payroll between draws.

Construction pays in arrears through progress billing, holds back 5–10% of everything, and demands mobilization cash before the first draw. Capital for GCs, subs, and specialty trades has to be built around that reality — lines of credit, construction invoice factoring, and asset-based structures from $50K to $20M.

Reviewed by Ryan Hurley, Co-Founder & CEO

The Challenge

Why construction creates unique working capital pressure.

Construction cash flow is fundamentally different from most industries. You spend money upfront — materials, labor, equipment rental, subcontractors — and get paid in arrears through progress billing, often with 5–10% retainage held until project completion. A GC running three simultaneous projects can easily have $500K–$2M in earned revenue sitting in retainage while needing that same cash to start the next project.

The timing problem compounds with growth. Every new contract you win requires capital mobilization — materials, crew, equipment, bonding — weeks or months before the first draw payment arrives. The more successful you are, the more capital you need. And traditional banks often struggle with construction: the project-based revenue model, the retainage lag, and the subcontractor payment chains make standard underwriting difficult.

Working capital for construction isn't about covering a short-term gap. It's about creating a financial structure that matches the way construction actually operates — project-by-project, draw-by-draw, with retainage releasing months after the work is complete.

Common Scenarios

When construction companies need working capital most.

Project mobilization

Winning a Large Contract Without Cash to Start

You've been awarded a $3M project, but material procurement, crew mobilization, and sub deposits require $400K before the first progress payment. Working capital funds the startup phase so you don't have to decline work that your operation can handle. See how one contractor mobilized two municipal projects with $1.3M in bridge capital.

Retainage gap

$500K+ Locked in Retainage Across Active Projects

Retainage on 5 active projects means half a million or more in earned revenue that won't release for 60–120 days after substantial completion. The options — and their honest limits — are on the retainage financing page.

Payroll pressure

Covering Weekly Payroll Between Draw Cycles

Your crew gets paid weekly. Progress billing cycles are monthly. That 3–4 week gap between wages and draws is a standing float with structural answers, covered in depth under construction payroll financing.

Capital Structures

How we structure working capital for construction companies.

Construction companies typically need flexible, revolving capital — not a fixed term loan. The amount you need fluctuates with your project pipeline, and the repayment timing aligns with draw schedules, not arbitrary monthly dates.

Revolving line of credit

A revolving credit facility is the most common working capital structure for construction. Draw when you need to mobilize a project or cover payroll, repay when draws arrive. The facility stays available for the next project without reapplying.

Asset-based lending against receivables and retainage

For GCs and subs with $5M+ in revenue, an ABL facility can use your receivables, retainage, and contract backlog as a borrowing base. As you win more work, the facility grows with you — providing capital capacity that scales with your project pipeline.

Equipment financing for fleet and heavy machinery

Excavators, cranes, loaders, and specialty equipment represent major capital investments. Equipment financing preserves your working capital by dedicating a separate facility to asset purchases, with terms structured around the equipment's productive life.

Purchase order and contract financing

When you've won a contract but need capital to purchase materials and mobilize — before you've even started billing — PO financing provides capital against the signed contract, bridging the gap between award and first draw.

The specialist discipline

Construction invoice factoring: how it actually works on pay applications.

Construction factoring is its own discipline inside invoice factoring, because a pay application is not an ordinary invoice. It is submitted on a billing calendar, approved by the GC or owner’s representative, cut for retainage, and paid on contract terms that may sit behind a pay-when-paid clause. Generalist factors often decline construction entirely; the specialists who do it well have built their mechanics around those realities.

What to expect from a construction factoring facility, stated plainly: advances typically run 70–80 percent of approved pay applications — lower than the 85–90 percent common in other industries, because dilution risk is higher. Retainage is excluded from eligible receivables almost universally; the facility funds the current portion of each billing. Underwriting centers on the credit of the GC or owner paying the invoice, your track record of approved (not disputed) billings, and lien-waiver discipline. And approval status matters enormously: an approved pay app is fundable collateral; a submitted one is a hope.

Where it fits best: subcontractors and GCs with reliable counterparties whose growth keeps outrunning a fixed line — because factoring capacity scales with billings automatically. Where it fits poorly: heavily disputed books, front-loaded contracts already billed ahead of cost, and companies whose real problem is retainage rather than the current-billing float. Fees price for construction’s approval-cycle risk; run any quote through the capital cost calculator against your actual payment lag before signing.

The build-out of options

Subcontractor financing: an honest map of a crowded product landscape.

A wave of construction-specific financing products has emerged for subcontractors — material financing programs that pay your supplier on extended terms, mobilization lenders that fund project startup against the contract, pay-app advance products, and traditional factoring and lines of credit. Each markets itself as the answer. None of them is; each is a tool priced for a specific gap.

  • Material financing programs pay the supplier directly and give you extended terms — effectively purchase-specific credit. Strong for material-heavy phases; they do nothing for labor, and terms cost money that must come out of job margin.
  • Mobilization and contract-based lenders fund the award-to-first-draw gap against the signed contract. Purpose-built and useful; pricing reflects the risk of a project that has not billed yet.
  • Pay-app factoring funds billings after approval — the cheapest of the transactional options once billing is flowing, and the one that scales with volume.
  • A working capital line is cheaper than all of the above when the balance sheet supports it, and covers every gap the transactional products slice up individually.

As an independent advisory, we place none of these exclusively and all of them situationally — which means the comparison you get from us is the one a single-product lender structurally cannot give: the combined cost of the specific mix your projects need, including the option of financing the whole cycle with one facility instead of three products. That comparison, run against a real project’s cash curve, is the fifteen-minute conversation that saves the margin.

Our Approach

We evaluate construction companies the way construction actually works.

We don't evaluate GCs and subcontractors through a retail lending lens. We understand progress billing, retainage, bonding capacity, WIP schedules, change orders, and the difference between contract backlog and actual cash on hand. That context drives our facility recommendations.

With $500M+ deployed across 1,000+ businesses in 50+ industries — including extensive construction experience — we've structured capital for residential and commercial GCs, specialty subcontractors, civil contractors, and trade contractors. From $200K working capital facilities for electrical subs to $10M+ ABL structures for mid-size general contractors.

  • Facilities from $50K to $20M+ structured around project flow and draw cycles
  • 48-hour preliminary recommendation after reviewing your contract backlog and financials
  • Senior advisor who understands construction capital from first call through closing
  • Multiple facility types available — line of credit, ABL, equipment, PO financing — through a single relationship

Related

Explore more construction capital resources.

Product

Line of Credit

Revolving working capital that flexes with your project pipeline and draw schedule.

Case Study

Construction Case Study

How a growing contractor structured capital to manage retainage and scale project capacity.

Research Report

Texas Data Center Capital Outlook

How AI infrastructure awards, procurement, billing, and payment terms can change contractor project-cash requirements.

Situation

Increasing Bonding Capacity

Sureties size programs from working capital. The five balance-sheet moves that raise the number they credit.

Situation

Payroll Between Draws

Weekly wages against monthly pay applications — sizing the float and the structures that fund it.

Questions we are asked

Construction working capital, answered directly.

How does construction invoice factoring work?
A factor advances typically 70 to 80 percent against approved pay applications within days of approval, collects when the GC or owner pays, and releases the remainder minus its fee. Retainage is excluded from eligible receivables, underwriting centers on the credit of the party paying the invoice, and approval status is everything — approved billings are fundable collateral, submitted ones are not yet. It suits contractors with reliable counterparties whose growth keeps outrunning a fixed credit line.
How much working capital does a construction company need?
Enough to carry three floats at once: mobilization costs from award to first draw, the payroll float between weekly wages and monthly draw receipts, and the retainage held across active projects. Each is calculable from your WIP schedule and payroll register — summed, they are the facility size. Rules of thumb based on revenue percentage miss the point, because two contractors with identical revenue can carry wildly different floats depending on contract terms.
Can a construction company get a line of credit from a bank?
Established GCs with clean financials can, though banks underwrite construction cautiously — project-based revenue, retainage, and pay-when-paid chains do not fit standard formulas, and bank limits are sized to history rather than backlog. Contractors who have outgrown a bank limit, or been declined an increase on one, usually solve it structurally with a borrowing-base facility against receivables rather than by re-arguing the file.
What financing exists for winning a contract bigger than my balance sheet?
Contract-backed structures: mobilization funding against the signed award, PO financing for materials, pay-app factoring once billing starts, and bridge capital shaped to the draw schedule. The step-up job is financeable — the discipline is modeling its month-by-month cash curve before signing, because mobilization math on a transformative award is unforgiving. Our Texas data center research works a $10M award through six different cash profiles for exactly this reason.
Does working capital affect bonding capacity?
Directly — sureties size bonding programs primarily from analyzed working capital, with aggregate programs commonly discussed at 10 to 20 times that figure. Restructuring short-term debt, converting equipment equity to cash, and maintaining demonstrated liquidity all raise the number sureties credit, which raises the work you can bid. The full set of levers is on our bonding capacity page.

Let's build a capital structure that matches your project pipeline.

Whether you're managing retainage, mobilizing new projects, or scaling capacity — start with a consultation to review your options.

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