Revenue-Based Financing for Construction Companies
Revenue-based financing gives a construction company a lump sum repaid as a share of deposits, so a month with no draw brings a small payment instead of a fixed hit. That matches how contractors get paid. The total repayment is fixed at signing, so a big draw pays down more at once rather than lowering the overall cost.
Why a revenue share suits draw-based income
Payments that wait for the draw
Contractors often go weeks with little coming in, then receive a large draw. A fixed daily debit keeps coming out during the dry weeks. A share of deposits falls to almost nothing in those weeks and catches up when the draw lands.
How the funder counts revenue
With no card batches to split, the funder reviews your bank deposits each week or month and debits its percentage. Transfers between your own accounts and loan proceeds don't count, so keep draw deposits clearly identifiable.
A 5% share through January
Funding of $110,000, capped at $146,300, against $200,000 in typical monthly sales; the funder keeps 5% of each month until the cap is met.
| Month | Revenue | Remittance at 5% | Remittance as a share |
|---|---|---|---|
| An average month | $200,000 | $10,000 | 5.0% |
| January, the slowest | $190,200 | $9,510 | 5.0% |
| August, the busiest | $205,200 | $10,260 | 5.0% |
Expect about 15 months to hit the cap at average revenue, with January sending only $9,510. We picked January because BLS job counts for construction (NAICS 23) sit lowest then, at 95.1 against 100, versus 102.6 in August.
Where contractors use it
- Mobilizing for a new job: permits, deposits on materials, first weeks of labor.
- Bridging a slow winter while keeping a core crew on payroll.
- Buying materials in bulk ahead of a price increase.
Watch for these terms
Minimum payments
Some contracts set a floor that applies even when revenue drops, which cancels much of the benefit in a no-draw month. Ask whether there's one and how it's calculated.
Reconciliation timing
If the funder estimates your revenue and debits a fixed amount, then adjusts later, learn how often it reconciles. Monthly reconciliation on a draw-based business can leave you overpaying for weeks.
Comparing it with a line of credit
A line costs less if you qualify and repay quickly, since you pay only on what you draw. Revenue-based financing is easier to get and flexes automatically. Contractors with strong books and bank relationships lean toward the line; newer or fast-growing firms often start with a revenue share.
Quick answers
Does revenue-based financing work for contractors?
Yes, it fits draw-based income well. The funder takes a percentage of deposits, so payments shrink during gaps between draws and rise when a draw arrives. Check for a minimum payment and ask how often the funder reconciles against your actual deposits, because both affect how well it flexes.
How does a revenue-based funder calculate a contractor's payment?
It totals your business deposits for a set period, usually a week or a month, and debits the agreed percentage. Transfers and loan proceeds are excluded. Some funders debit an estimate and true it up later, so ask exactly how and when the adjustment happens.
Is revenue-based financing cheaper than an MCA for construction?
Not necessarily. The total cost depends on the repayment amount you agree to, just like an advance. The difference is how payments behave: a revenue share bends with draws, while a fixed advance debit doesn't. Compare the total repayment and the payment in a slow month for both.
More for construction companies
- Same-day merchant cash advance for construction companies
- Second position MCA for construction companies
- MCA consolidation for construction companies
- Business line of credit for construction companies
- How funders read construction companies
- Revenue-based financing: how it works
Run your own numbers with the factor rate 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.