The first 60 days are the most expensive days of the job

Construction is paid in arrears. A subcontractor does the work, submits a pay application at the end of the month, waits for the general contractor to approve it and be paid by the owner, and receives its money 30 to 60 days after that, minus retainage of 5 to 10 percent held until the project closes. In Texas, where public work, school districts, hospital systems and large commercial developers make up much of the market, those terms are the rule rather than the exception. Meanwhile the crew is paid weekly, the supplier wants a deposit on the material package, the equipment rental company invoices on delivery, and the bonding and insurance certificates the contract requires are paid up front.

The result is a cash curve every contractor knows: a steep dip in the first two months, a slow climb as pay applications start clearing, and a final bump when retainage is released. The businesses that grow are the ones that can finance the dip. The ones that cannot either turn down the award or take it and discover, six weeks in, that the biggest job they ever won is the reason they cannot make payroll on the small ones.

What getting started costs: a Texas example

A commercial mechanical subcontractor in the Houston area, six years in business with about $2.4 million in annual revenue, is awarded the HVAC package on a new medical office building. The contract is $1.1 million over nine months, paid net 45 on approved pay applications with 10 percent retainage.

The subcontractor needs to carry roughly $280,000 beyond what the first payment returns, for about 75 days, and then a smaller rolling gap each month until closeout. That is the shape to finance: a large front-loaded need that becomes a recurring, shrinking one.

Four ways Texas contractors fund the start of a project

1. A business line of credit for materials and payroll

A business line of credit is the standing tool: draw for the material deposit and the first payrolls, repay as each pay application is honored, and reuse it on the next award. Because it takes a few days to open, the time to arrange it is when the bid goes in, not when the notice to proceed arrives. It typically wants a year in business, $250,000 or more in annual revenue and a credit score of 650 or higher.

2. A working capital loan when mobilization starts this week

When the notice to proceed is dated and the supplier wants its deposit now, a working capital loan funds within 24 to 48 hours of a signed offer, sized to the mobilization spend and repaid over a short term as the early pay applications clear. It is underwritten mainly on recent bank deposits, so it is available to contractors who do not yet qualify for a line, and it can be refinanced into a line once the project is running.

3. Equipment financing for what the contract requires

If the job needs a machine you do not own, an excavator, a larger lift, a welding rig, a CNC plasma table for a fabrication package, finance it on the equipment itself rather than out of the operating account. The vendor quote and the business’s cash flow carry the file, the term runs the working life of the machine, and the cash stays available for the materials and the crew. A business term loan fits a package of equipment and installation.

4. Invoice financing on approved pay applications

From month two onward, approved pay applications are receivables, and receivables are collateral. Invoice financing through the RAN Funding lender network advances most of each approved application on submission and settles when the general contractor pays, underwritten on the GC’s credit rather than the sub’s. Retainage is usually excluded until it is released, and funders read pay-when-paid clauses and lien-waiver terms before they advance.

Read the contract before you size the financing

Three clauses decide how big the gap is. The payment terms and whether they are pay-when-paid or pay-if-paid, which determines how long you wait if the owner is slow. The retainage percentage and when it is released, which determines how much of your margin sits with the GC until the end. And the schedule of values, which you can often negotiate to front-load mobilization and material costs so the first pay application recovers more of the start-up spend. A contractor who bills mobilization as its own line item in month one carries a smaller gap than one who spreads it across the job.

Bring the contract to the application. The funding specialist will size the facility to the real gap, the mobilization spend less the first payment, plus a cushion for a late month, rather than to the contract value, and will structure the equipment piece separately so the operating line is not consumed by a machine that should have its own financing.

What a Texas contractor file needs

• The executed contract or notice to proceed, with payment terms, retainage and the schedule of values.
• Three months of business bank statements; twelve if the business is seasonal or the last year included a large project.
• Supplier quotes for the material package and equipment quotes with model numbers for anything to be financed as equipment.
• An aging report of current receivables and the general contractor’s name for any invoice financing.
• Every open position, including equipment leases, supplier credit and any existing advance.

Checking your options is a soft inquiry and takes about five minutes. One application goes to our lender network, and one dedicated funding specialist comes back with the pieces structured together, with every term explained before you sign. Apply online or call 877-522-6045.

Winning the job should not cost you the ones you already have. Check your Texas contract financing options — about five minutes, three months of statements, and a soft inquiry only.