Working Capital for General Contractors: Pick the Right Financing for Your Situation

Scan the descriptions below, pick the one that matches your situation — slow-paying client, payroll gap, equipment purchase, or a credit profile that's taken some hits — and follow that link directly into the guide.

What to know before you choose

General contractors face a specific cash flow problem: you carry costs for weeks or months before the owner or GC cuts a check. The right financing product depends on what's creating the gap, not just how much you need. Getting this wrong costs real money — a merchant cash advance on a $200,000 draw can run an 80–150% APR equivalent, while the same need covered by an SBA 7(a) line costs 8.5–11% APR. That spread is the difference between a manageable tool and a debt spiral.

The four situations contractors actually face — and what fits each:

• Slow-paying owner or GC (receivables are the problem): Invoice factoring lets you convert unpaid invoices into cash immediately — typically 80–90% of face value advances within 24–72 hours, with fees of 1–5% per 30-day period. It's not a loan, so your credit score matters less than your client's creditworthiness. For a plain-English walkthrough of how this works on a construction contract, this practical guide to construction invoice factoring covers the mechanics, notice-to-client requirements, and what to watch for in a factoring agreement.

• Payroll or material costs between draws (short-term cash gap): A revolving business line of credit is the cleanest fit. Banks want 700+ credit, two years of tax returns, and $150,000–$250,000 in annual revenue minimum. Online lenders approve in 24–72 hours with looser requirements but higher rates. SBA 7(a) loans top out at $5,000,000 and carry the lowest rates, but the 30–45 day approval window means they're a planning tool, not an emergency one.

• Equipment purchase (excavator, lifts, concrete finishing equipment): Equipment financing is collateralized by the asset itself, which is why approvals run 1–3 business days and credit requirements are softer than unsecured lines. Rates for contractors with 700+ credit run 7–10% APR in 2026. Scores in the fair range (620–679) add roughly 2–4 percentage points. Contractors buying heavy equipment should also note the Section 179 expensing limit sits at $1,220,000 for 2026 — coordinate with your accountant before closing. For concrete-specific operations, the concrete contractor working capital guide covers equipment and draw-cycle financing together, including state-level lender differences in California and Florida.

• Credit is below 620 (or you've been turned down before): Bad credit doesn't mean no options — it means the path is different. Equipment loans, factoring, and asset-backed lines all underwrite around collateral or receivables quality rather than your FICO. The bad credit financing hub maps those alternatives in detail. Subprime unsecured loans exist, but the cost is high — model the payment before you sign.

What trips contractors up most often:

• Applying for the wrong product. A line of credit for a single large equipment purchase will be undersized and expensive compared to a term equipment loan.
• Underestimating how much documentation matters. Most lenders review 12 months of bank statements. SBA lenders also require a 1.25x debt service coverage ratio — meaning your net operating income must clear your annual debt payments by at least 25%.
• Missing the two-year mark. The SBA 7(a) program requires 24 months in business. If you're under that threshold, microloans (up to $50,000 through SBA), equipment financing, or factoring are the realistic alternatives. Some subcontractor-focused factoring programs will work with businesses under a year old as long as the invoices are from creditworthy clients.
• Origination fees eroding the value of a short-term draw. Most lenders charge 1–3% upfront — factor that into the true cost of a bridge draw you plan to repay in 60–90 days.

Choose your state from the links below or use the product guides above to go straight into the option that fits your situation.