Working Capital for Contractors

Signed work doesn't pay you on day one. Materials, crews and retainage each open a different gap between what you spend and what you collect. Here's how to match the funding to the gap, what it costs in dollars, and when not to borrow at all.

Fundangle · independent commercial-finance broker · updated October 2026

The three cash gaps on a job

"We need working capital" usually means one of three different problems. They have different sizes, different timing and different right answers, so name yours before you compare offers.

1. Materials and mobilization

You buy materials, rent equipment and move crews onto the site before you can bill the first pay application. It's a one-time hump at the start of each job, and it ends when the first payments come in.

2. Payroll between pay applications

Crews get paid every week. Pay applications go in monthly and get paid on the general contractor's or owner's terms, often 30 days or more after approval. This gap repeats for the life of the job, and it grows when you run several jobs at once.

3. Retainage

The general contractor or owner holds back a share of every payment, often 5% to 10%, until the job is complete and closed out. That money is earned, but it can arrive months after your last day on site, on a timeline you don't control.

One job, worked through in dollars

A specialty subcontractor signs a four-month, $300,000 job. The numbers below are illustrative, not an offer, but the shape is typical:

The job makes money: about $262,000 of materials and payroll against a $300,000 contract leaves roughly $38,000 of margin. The problem is purely timing. Look at what the numbers say about each gap:

• The $70,000 of materials is a one-time hump that the pay applications pay back over the life of the job.
• Payroll keeps running ahead of collections every month until the job ends.
• The $30,000 of retainage is part of your margin, and it's the last money you'll see.

Match the funding to the gap

What it costs: the same $70,000 two ways

Here's the materials hump from the example, covered two different ways. Both are illustrative, not offers.

Same $70,000, roughly four times the cost. The reason is structural: a line charges for the days you hold the money, and the job pays it down as pay applications clear. An advance's cost is fixed no matter how fast the job pays. On this job, $24,500 would eat almost two-thirds of the $38,000 margin.

That doesn't make revenue-based funding wrong every time. A line of credit has to be approved and set up before you need it, and not every business qualifies today. When speed or qualification rules the line out, the question becomes whether the job's margin can carry the advance's dollar cost. How an advance compares with a term loan walks through that math.

What lenders look at

Fundangle's application asks how much you need, what it's for, your monthly revenue band, time in business, and any current funding. No documents to start. If you move forward, a lender decides what it needs, and contractors are usually asked for some of the following. Having them ready cuts the back-and-forth:

• Your last three months of business bank statements. It's the first thing every lender asks for.
• Signed contracts or a backlog list with the general contractor or owner on each job.
• Your pay application schedule and payment terms, so the repayment can line up with when you actually get paid.
• An accounts receivable aging showing what's billed, what's approved and what's late.
• Retainage held, by job, and when each is expected to release.
• Balances and payments on any current financing, including equipment loans and advances.

Most working-capital products are sized on deposits you've already received, not on the contract value. A big backlog helps the story; your bank statements usually set the amount.

When not to borrow

• The job doesn't pencil out. If the margin can't absorb the cost of the money, funding makes a losing job lose faster.
• The gap is a dispute. An unpaid change order or a contested invoice needs a signature or a settlement, not a loan.
• You'd be repaying weekly from money that arrives at closeout. Retainage you can't time is a poor source of repayment for a short-term product.
• You'd be stacking. Adding a new advance on top of existing daily or weekly payments compounds cost and risk fast. If you're already paying on one or more advances, consolidating what you have is usually the smarter move.
• Anyone promises you approval or a guaranteed rate. No one can. Only the funder decides, after review. Treat guarantees as a red flag.

Financing the business for the first time

Plenty of established contractors have run on cash and supplier terms for years and have never borrowed for the business. That's a fine place to start from. Steady deposits and a clean bank statement history count for a lot, and you'll see the cost in dollars before you decide anything.

Two things to know going in. Bank-grade products such as term loans and SBA loans usually want longer operating history, tax returns and more paperwork, and they take longer to close, so start early if one might fit. And if the business is brand new with little or no deposit history yet, most working-capital products won't fit; supplier terms and equipment financing are usually better first steps.

Common questions

Can I get funding against a signed contract?

A signed contract helps, but most working-capital products are sized on the deposits in your bank statements, not on contract value. Expect the contract to support the request rather than set the amount.

Does retainage count as revenue to a lender?

It's earned, but until it's paid it isn't in your deposits, so a lender reading bank statements won't see it. Count on it for your margin, not for your next payment.

Line of credit or lump sum?

For a gap that repeats, like payroll between pay applications, a line usually costs less because you pay mainly on what you draw, for as long as you draw it. For a one-time hump with a clear payoff date, compare the total dollars of each option, not the rates.

Will checking my options affect my credit?

Checking options won't affect your personal credit. A lender may check credit later in its own review, and we tell you before any credit inquiry.