Business Line of Credit for Construction Companies
A business line of credit lets a construction company draw for materials and payroll while it waits on draws, then repay when the owner pays, with cost only on the balance. It's the cheapest short-term money a contractor can use, but funders want clean books, time in business and a clear view of your backlog and retainage.
How contractors use a line
Covering the draw lag
Crews get paid weekly, while owners release draws after inspections and paperwork. A draw on the line for payroll, repaid when the owner's check clears, costs a few weeks of interest instead of an advance's full fee.
Materials on short notice
A supplier offering a discount for paying now, or a price increase coming next month, is a good reason to draw. The savings often cover the interest.
Retainage gaps
Retainage held until a project closes out ties up money you've earned. A line bridges that wait, but don't lean on it for months at a time.
What drawing for January costs
Out of a $60,000 limit, $24,000 goes out for January at 2.25% monthly interest. Deposits average $200,000, and the balance drops by thirds.
| Step | Balance on the line | Cost that month at 2.25% |
|---|---|---|
| Draw in January | $24,000 | $540 |
| After one repayment | $16,000 | $360 |
| After two repayments | $8,000 | $180 |
| Paid back | $0 | $0 |
All in, about $1,080, and the limit reopens once it's repaid. Per BLS, construction (NAICS 23) employ the fewest people in January (95.1 on a 100 average) and the most in August (102.6).
What a line funder checks for a contractor
- Business tax returns or a profit and loss statement, not just bank statements.
- A work-in-progress schedule showing jobs, billings and costs to complete.
- Time in business and a credit score above the funder's floor.
- Existing debt, including any daily advance payments.
Keeping the line in good standing
Repay draws when the matching job pays, and don't let the balance sit at the limit for months. Many lines are reviewed yearly. A line that's always full reads as a cash shortage, and the funder can cut the limit right before your busy season.
Line or advance?
If you can qualify, a line almost always costs less for recurring short gaps. An advance makes sense for a one-time need when you can't wait for a line approval or don't meet its requirements yet.
Quick answers
Can a construction company get a business line of credit?
Yes, contractors are a common fit. Funders usually want tax returns or financial statements, a work-in-progress schedule, some time in business and credit above their minimum. Heavy existing debt, especially daily advance payments, can reduce the limit or delay approval until it's paid down.
What should a contractor draw on a line of credit for?
Short gaps that a specific payment will repay: payroll until a draw clears, materials ahead of a price increase, or bridging until retainage is released. Long-term purchases like heavy equipment belong on equipment financing, which keeps the line open for the next gap.
Why do funders ask contractors for a WIP schedule?
A work-in-progress schedule shows each active job's contract value, what you've billed, what it cost so far and what's left. It tells the funder whether jobs are profitable and when money is coming. A clean WIP often gets a larger limit than bank statements alone would support.
More for construction companies
- Same-day merchant cash advance for construction companies
- Second position MCA for construction companies
- MCA consolidation for construction companies
- Revenue-based financing for construction companies
- How funders read construction companies
- Business line of credit: how it works
Run your own numbers with the MCA APR calculator.
Want to see what fits a construction company like yours?
Tell us your slow months and your open advances, and we'll shop the file with funders whose programs fit. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.