Scenario
Construction company waiting 60 days on receivables: working capital options
Payroll is weekly, suppliers want 30 days, and the GC pays in 60 minus retainage. Here is how a growing subcontractor can bridge that gap, and why the wrong product can cost $40,000 more on a single job.
How can a construction company get working capital while waiting on receivables?
The best fit is usually a business line of credit: draw for payroll and materials, repay when the general contractor pays, and reuse it on the next job. Accounts receivable financing works if approved invoices qualify. Short-term loans fund fastest at a moderate cost, while a merchant cash advance is the most expensive way to cover a 60-day gap.
The situation
A commercial drywall and framing subcontractor, 6 years in business, billing about $200,000 a month. General contractors pay in about 60 days, and hold 10% retainage until each project closes. Weekly payroll runs about $35,000 and materials are due in 30 days. It just won a job that needs about $150,000 in labor and materials before the first check arrives. Credit is 680.
This company is profitable on paper and short on cash in practice. Construction’s cash gap is structural: you pay labor weekly and suppliers in 30 days, then wait 60 days or more to be paid, minus retainage. Growth makes it worse, because every new job widens the gap before it closes it. For the full product range, see construction business loans.
Measuring the gap
The need is $150,000 for roughly two months, repeating as jobs start. That shape, short and recurring, should drive the choice more than anything else.
Four ways to cover it, and what each costs
| Option | Cost to bridge $150K for ~60 days | Speed | Fit for this gap |
|---|---|---|---|
| Business line of credit, 18% APR | ≈ $4,440 in interest | 3 to 10 days to open | Best: draw, repay when paid, reuse |
| Receivables financing, 3% per 30 days | ≈ $9,000 | 3 to 10 days to set up | Good, if the invoices qualify |
| Short-term loan, 18% over 12 months | ≈ $15,000 unless repaid early | Same day to 3 days | Workable; check prepayment terms |
| Merchant cash advance, 1.30 over 8 months | $45,000, fixed | Same day to 2 days | Poor: 8 months of cost for a 2-month need |
Illustrative pricing. MCA daily payment would be about $1,127 (≈ $24,400 a month). Short-term loan payment about $13,752 a month.
The difference between the best and worst fit is roughly $40,000 on a single job. A revenue-based advance is the fastest, but its cost is fixed no matter how quickly the GC pays, so it only makes sense when nothing else can fund in time.
Why a line of credit usually wins
A business line of credit matches how construction cash moves. Draw when payroll and materials hit, pay it down when the GC pays, and draw again on the next job. You pay interest only on the days money is out. With 6 years in business and a 680 score, this sub is a reasonable candidate. The practical advice: open the line before you need it, while statements look strong, because approval takes days.
When receivables financing is the better tool
Accounts receivable financing grows with billing instead of a fixed limit, which helps a sub that is scaling fast. Construction receivables are harder to finance than most, so expect questions about:
- Progress billing and pay applications. Approved pay apps are easier to finance than pending ones.
- Retainage. Usually excluded from the advance until it is released.
- Pay-when-paid clauses. These shift owner-payment risk to you, and funders read the contract.
- GC credit quality. Established general contractors with a clean payment record make the invoices more fundable.
- Lien waivers and notices. Keep your paperwork current; it protects both you and the funder.
Other moves that shrink the gap
- Finance equipment separately. Lifts, trucks and tools on equipment financing keep cash free for payroll.
- Negotiate a mobilization or deposit payment on new contracts.
- Bill on time, every time. A pay app submitted a week late is a week added to the gap.
- Ask suppliers for 45 or 60 day terms to match how you are paid.
- Track retainage by project and chase release the day the job closes.
Plug your figures into the funding comparison tool to rate every product for your file, then price specific offers with the factor rate calculator or the loan payment calculator.
Common questions
Can I factor construction invoices with retainage?
Often the invoice can be financed, but the retainage portion is usually excluded until it is released. Funders also review pay-when-paid clauses, lien waivers and whether the pay application is approved.
What is the fastest working capital for a contractor?
Revenue-based funding and short-term loans can fund the same day or within three days. Lines of credit and receivables facilities take a few days to set up but cost far less for a short, recurring gap.
Do lenders count receivables as revenue?
Most revenue-based funders size offers on deposits that have already landed in your bank account. Receivables financing is the product that lends against money you are still owed.
Should I use a merchant cash advance to make payroll?
Only if nothing cheaper can fund in time. Its cost is fixed regardless of how fast the GC pays, so a 60-day need can end up carrying 8 months of cost.
See what you qualify for
One application, about five minutes, soft pull only. A funding specialist comes back with the offers you qualify for — and explains every term before you sign.