Construction business funding is capital a contractor borrows to cover the gap between paying for a job and getting paid for it — money for payroll, materials, equipment, mobilization, and bonding, usually repaid over months or years. Because construction runs on slow-paying draws, long retainage holds, and material costs due before the first invoice clears, most contractors need outside funding at some point even when the business is profitable. The right option depends on how fast you need the money, how strong your credit and revenue are, and whether the need is a one-time purchase or a recurring cash-flow squeeze.
For contractors who need working capital quickly and may not have pristine credit, a revenue-based advance through a marketplace is often the most realistic path: approval leans on your bank-deposit history and monthly revenue rather than your FICO score, minimums start around $10,000, and funding frequently lands in 24 to 48 hours. It is not the cheapest money available, and it is never guaranteed — but it fills gaps that banks and SBA lenders are too slow or too strict to cover.
Key takeaways
- Construction funding covers the gap between spending on a job and collecting on it — payroll, materials, equipment, and mobilization are the most common uses.
- Revenue-based advances and marketplaces approve mainly on monthly revenue and bank-deposit history, with FICO 500+ accepted and funding often in 24-48 hours; minimums typically start around $10,000.
- Bank and SBA loans offer the lowest rates but take weeks to months and usually require 650+ credit, two years in business, and strong documentation.
- Retainage (often 5-10% held until project completion) and net-30 to net-90 draw cycles are the underlying reason contractors run short even when profitable.
- Equipment financing lets the machine itself serve as collateral, often requiring little or no additional down payment.
- Costs vary widely by product: term loans and lines of credit are quoted as APR, while advances and factoring use factor rates and fees that convert to a much higher effective cost.
- No legitimate lender guarantees approval; anyone promising 'guaranteed' construction funding is a red flag.
Why construction businesses need funding more than most industries
Construction has a structural cash-flow problem that few other industries share. You buy materials and pay crews weeks before you invoice, then wait 30, 60, or 90 days for a draw to clear — and even then the owner or general contractor holds back retainage, commonly 5 to 10 percent, until the entire project is signed off. A profitable job on paper can leave your bank account empty in the middle of it.
Common triggers that send contractors looking for capital include:
- Material and mobilization costs upfront. Lumber, concrete, steel, and permits are due before the first progress payment arrives.
- Payroll that cannot wait. Crews get paid weekly or biweekly regardless of when the customer pays you.
- Retainage holds. The last 5 to 10 percent of a large contract can be tied up for months after the work is done.
- Taking on a bigger job. Winning a contract larger than anything you have done before often requires more working capital than the business currently holds.
- Equipment breakdowns. An excavator or truck failing mid-project can halt billing entirely until it is replaced.
- Seasonality. Many trades slow in winter and need a bridge to carry fixed costs until spring.
Understanding which of these is driving your need matters, because a one-time equipment purchase calls for a very different product than a recurring cash-flow gap.
The main types of construction business funding, compared
There is no single 'construction loan' for operating a contracting business. (Note that a 'construction loan' in real estate financing — money to build a property — is a separate product from funding to run a construction company, which is what this guide covers.) The realistic options for a contractor's working capital fall into a handful of categories, each with different speed, cost, and qualification tradeoffs.
| Funding type | Best for | Typical speed | Credit lean | Relative cost |
|---|---|---|---|---|
| Revenue-based advance / MCA marketplace | Fast working capital, weaker credit | 24-48 hours | Revenue & bank deposits (FICO 500+) | Higher |
| Business line of credit | Recurring, unpredictable gaps | Days to weeks | Credit & revenue | Moderate |
| Term loan (bank or online) | One-time larger investment | Days (online) to weeks (bank) | Credit-heavy | Low to moderate |
| Equipment financing | Buying machinery or vehicles | Days | Credit + the equipment as collateral | Low to moderate |
| Invoice factoring / financing | Slow-paying draws & retainage | Days | Your customers' credit | Moderate |
| SBA 7(a) loan | Cheapest capital, can wait weeks | Weeks to months | Credit-heavy, documentation-heavy | Lowest |
A useful way to choose: if the need is fast and your credit is imperfect, a revenue-based advance or factoring wins on accessibility. If you can wait and your books are clean, a bank term loan or SBA loan wins on cost. A line of credit sits in the middle and is often the best long-term tool for recurring gaps.
What construction funding actually costs
Cost is where most guides go vague — including the big marketplaces. Here is the honest version. Different products quote price in different ways, and comparing them requires converting everything to the same yardstick.
- Term loans and lines of credit are quoted as an annual percentage rate (APR). For established contractors, bank rates might run in the high single digits to the teens; online term loans and lines commonly run higher.
- SBA 7(a) loans are among the lowest-cost options, typically tied to the prime rate plus a spread, but they take the longest and demand the most paperwork.
- Equipment financing is usually quoted as an interest rate, and because the equipment is collateral, rates are often lower than unsecured working capital.
- Revenue-based advances use a factor rate, not an APR. You might see a factor of, for example, 1.25 to 1.45 — meaning for every $1 advanced you repay $1.25 to $1.45 in total. That is repaid quickly, which makes the effective annualized cost substantially higher than the factor rate alone suggests.
- Invoice factoring charges a discount fee, often a percentage per 30 days the invoice is outstanding.
The table below shows how a factor rate translates into total repayment on a representative advance. These are illustrative figures to show the math, not a quote.
| Example scenario | Amount funded | Factor rate | Total repaid | Cost of capital |
|---|---|---|---|---|
| Small subcontractor, for example | $25,000 | 1.30 | $32,500 | $7,500 |
| Mid-size GC, for example | $75,000 | 1.28 | $96,000 | $21,000 |
| Larger trade contractor, for example | $150,000 | 1.25 | $187,500 | $37,500 |
The takeaway: a factor rate is not an interest rate, and cheaper-sounding options that take longer can be far less expensive overall. Always ask for the total dollar cost and the payment schedule before signing, and weigh that against what the capital lets you earn on the job.
How to qualify — the reality behind the checklist
Qualification requirements vary sharply by product, and the marketing minimums you see advertised are floors, not guarantees. Here is what different lenders actually weigh.
Revenue-based advance / marketplace — the most accessible path. Underwriting centers on your business bank statements, usually the last three to six months. Lenders look for consistent deposits, average daily balances that do not sit at zero, and a manageable number of negative or overdraft days. Typical floors are around $10,000 to $15,000 in monthly revenue, at least a few months in business, and a FICO around 500 or higher. Because the decision leans on cash flow rather than credit, contractors who would be declined by a bank are frequently approved here.
Bank and SBA loans — the strictest. Expect a 650-plus personal credit score, two or more years in business, tax returns, financial statements, and often a business plan or project detail. Strong candidates get the lowest rates in the market; marginal candidates get declined or slow-walked.
Equipment financing — moderate. The equipment secures the loan, so credit standards are more forgiving than unsecured lending, and the machine itself often stands in for a down payment.
Invoice factoring — unusual in that the factor cares most about your customer's creditworthiness, since they are collecting from that customer. A contractor with strong general-contractor or government clients can factor even with weak personal credit.
Documents to have ready before you apply
Applications move faster when your paperwork is assembled up front. For a revenue-based advance, the list is short — one reason funding can close in a day or two. For bank and SBA products, expect a much heavier lift.
| Document | Revenue-based advance | Bank / SBA loan |
|---|---|---|
| 3-6 months business bank statements | Required | Required |
| Driver's license / ID | Required | Required |
| Voided business check | Required | Required |
| Business tax returns (1-2 years) | Sometimes | Required |
| Personal tax returns | Rarely | Required |
| Profit & loss / balance sheet | Rarely | Required |
| Accounts receivable / job schedule | Sometimes | Often |
| Business plan or use-of-funds | No | Often (SBA) |
If you factor invoices, add copies of the unpaid invoices and, sometimes, the signed contracts behind them.
Choosing the right option for your situation
Match the tool to the job. A few common contractor scenarios:
- You won a bid larger than any past job and need materials and payroll before the first draw. A revenue-based advance or a line of credit bridges the gap; factoring works well if the customer is creditworthy.
- Your cash gets tight every time draws run net-60 or net-90. A revolving line of credit is the most cost-efficient long-term fix because you only pay for what you draw.
- An excavator or truck died and you need a replacement now. Equipment financing, with the new machine as collateral, is almost always cheaper than using general working capital.
- Retainage is holding tens of thousands you have already earned. Factoring or a short-term advance can free that value now rather than waiting for final sign-off.
- You have strong credit, clean books, and can wait a month. An SBA 7(a) or bank term loan gives you the lowest cost of capital available.
A marketplace is useful precisely because it does not push a single product — it can surface the advance, the line, or the equipment option side by side so you compare real offers rather than commit to the first one you find.
How to apply and what happens next
For a revenue-based advance through a marketplace, the process is deliberately short:
- Apply online. A single application collects your basic business details and connects or uploads your recent bank statements.
- Review offers. Instead of one take-it-or-leave-it answer, a marketplace returns multiple offers so you can compare amounts, factor rates, and payment schedules.
- Confirm the numbers. Ask for the total dollar cost, the payment frequency (daily, weekly, or monthly), and any origination fee before you sign anything.
- Get funded. Once approved and signed, funds frequently arrive within 24 to 48 hours.
Two cautions worth repeating. First, no legitimate funder guarantees approval or a specific rate before reviewing your financials — treat 'guaranteed construction funding' as a warning sign. Second, borrow against a specific plan: the capital should let you take on work or buy equipment that earns more than the funding costs. Used that way, even higher-cost fast money is a sound business decision; used to plug a chronic loss, it is not.
Frequently asked questions
What credit score do I need for construction business funding?
It depends entirely on the product. Revenue-based advances and marketplaces commonly accept a FICO around 500 or higher because they weigh your monthly revenue and bank-deposit history more heavily than your score. Bank and SBA loans typically want 650 or higher along with two or more years in business and full documentation. If your credit is imperfect but your deposits are steady, the revenue-based path is usually the realistic option.
How fast can I actually get funded?
With a revenue-based advance, funding often lands within 24 to 48 hours of approval because the underwriting relies on bank statements rather than a lengthy credit review. Online term loans and lines of credit usually take a few days. Bank loans and SBA 7(a) loans take considerably longer — often several weeks to a few months — in exchange for lower cost.
How much funding can a construction business get?
Amounts range widely by product and by the strength of your revenue. Revenue-based advances commonly start around $10,000 and scale up as monthly deposits grow. Lines of credit, term loans, and SBA loans can reach into the hundreds of thousands or more for established contractors. As a rough guide, many revenue-based funders will advance a portion of your average monthly revenue, so stronger and steadier deposits support larger offers.
What is a factor rate, and how is it different from an interest rate?
A factor rate is a multiplier that tells you the total amount you will repay, not an annual percentage. If you are advanced $50,000 at a factor rate of 1.30, you repay $65,000 in total — a $15,000 cost. Because that amount is typically repaid over a short period, the effective annualized cost is much higher than the factor rate looks at first glance. Always convert offers to total dollars repaid so you can compare them fairly against APR-based products.
Can I get construction funding with bad credit?
Often, yes — through revenue-based advances, invoice factoring, or equipment financing. Revenue-based lenders focus on your cash flow and bank deposits, factoring depends on your customers' credit rather than yours, and equipment financing is secured by the equipment itself. These paths are more expensive than bank financing, but they are genuinely accessible when a bank would decline you. Be wary of any lender promising 'guaranteed' approval, which no legitimate funder can offer.
Should I use funding to cover retainage and slow-paying draws?
This is one of the most common and sensible uses. Retainage of 5 to 10 percent and net-60 or net-90 draw cycles can tie up money you have already earned. Invoice factoring or a short-term advance lets you access that value now rather than waiting for final project sign-off, keeping payroll and material purchases on schedule. The cost is worth it when it lets you keep a job moving or take on the next one.
Is a 'construction loan' the same as construction business funding?
No, and the terms are easy to confuse. A 'construction loan' in real estate financing is money to build a specific property, drawn down in stages as the structure goes up. Construction business funding — the subject of this guide — is working capital to operate your contracting company: payroll, materials, equipment, and cash-flow gaps between jobs. If you are financing the construction of a building you own, that is a different product from a different type of lender.
What documents do I need to apply?
For a revenue-based advance, very little: three to six months of business bank statements, a government ID, and a voided business check are usually enough, which is why funding is fast. Bank and SBA loans require much more — business and personal tax returns, financial statements, and often a business plan or use-of-funds. If you plan to factor invoices, have copies of the unpaid invoices and their contracts ready.
