How construction cash flow shapes lending
Contractors pay for labor and materials before the owner pays them. Retainage and slow draws stretch the gap, which is why lenders focus on working capital.
A typical job runs on net-30 to net-60 draws, and retainage can hold back a share of the contract until completion. Meanwhile payroll and suppliers want payment weekly. This timing gap, not lack of profit, causes most cash crunches.
Lenders read your work-in-progress schedule, backlog, receivables aging and past job margins. They want to see that jobs end profitably and customers pay.
What contractors use SBA loans for
Common uses include equipment purchases, working capital, refinancing high-cost debt, buying a competitor and owner-occupied shop or yard property.
- Equipment: excavators, trucks, lifts and tools. See how to use an SBA loan for equipment.
- Working capital: materials and payroll between draws.
- Refinance: replace short, expensive debt with a longer term, see SBA loans to refinance business debt.
- Property: a shop or yard through 504 or 7(a).
Prepare a current work-in-progress schedule that lists each open job, contract value, costs to date, billings to date and expected completion. It shows over- and under-billing and is the first document a construction-savvy underwriter wants. Pair it with an aged receivables report and a list of your largest customers by revenue.
Bonding capacity matters for public and larger commercial work. If your surety has set a limit, mention it, and ask whether a lender can structure financing around it.
What lenders look at
Expect review of two to three years of tax returns, financial statements, work-in-progress schedules, backlog, licenses, insurance and bonding capacity.
Underwriters like consistent margins across jobs, a diversified customer base and owners with field experience. Concentration in one customer or one big project raises concern. Licensing and insurance must be current.
Residential remodeling and new residential construction are restricted by many funders, including some SBA lenders, because of project and payment risk. If that is your work, ask each lender plainly whether they serve it before spending time on an application. Commercial, public and specialty trade work generally has more options.
Illustrative example: bridging a slow draw
Compare the cost of short-term financing against the profit from the job it lets you finish on time.
| Item | Amount |
|---|---|
| Contract value | $250,000 |
| Expected profit (15%) | $37,500 |
| Materials and labor needed upfront | $60,000 |
| Example funding cost | $6,000 |
If the funding enables the job and its profit, the $6,000 cost is a fraction of the $37,500 gain. If the job margin is thin or the owner is a slow payer, the math changes. Always run it before taking the job.
The SBA route versus faster options
SBA loans are cheaper and slower. Contractors facing a bid deadline or mobilization date often need funding in days.
Use SBA financing for planned, long-term needs such as equipment and refinancing. Use faster products for job-specific cash. See construction trades funding and heavy equipment financing for fits by trade.
Read SBA loan requirements to see if you are ready.
How ROI Funder can help contractors
ROI Funder places SBA loans, equipment financing, term loans, working capital and lines of credit, and shows true cost and payback before you sign.
We consider 500+ FICO, 6+ months in business and $20,000+ monthly revenue. Equipment financing typically takes 2-7 days, a business line of credit 24-72 hours, and approved, complete files can see working capital in the account the same business day. A complete file is the application plus three months of business bank statements.
Applying takes a few minutes, uses a soft credit pull and has no obligation. Apply online. Nothing is guaranteed, and residential remodeling is restricted by many funders.
Frequently asked questions
Can a construction company get an SBA loan?
Yes, if it meets eligibility and shows repayment ability. Lenders look closely at backlog, margins and receivables.
Do lenders restrict any construction work?
Many funders restrict residential remodeling and new residential construction. Ask lenders before applying.
How can I cover payroll while waiting for a draw?
A line of credit or working capital can bridge the gap. Compare the cost with the profit on the job.
Is equipment financing better than an SBA loan for machinery?
It is faster, 2-7 days with ROI Funder, but SBA loans usually cost less if you can wait.