Construction and specialty trades
Construction Financing for the Gap Between Cost and Payment
Contractors buy materials now and get paid later, with a slice held back until the job closes. In 2026 input costs are rising more than twice as fast as bid prices, which makes that gap wider than it looks on the contract.
What Financing Options Do Construction Businesses Have?
Four fit the trade. Invoice and receivables financing ($20,000 to $5,000,000, terms up to 36 months) borrows against unpaid progress billings instead of waiting out the terms. Equipment financing covers the full purchase amount of machinery, with the equipment as collateral. A business line of credit ($10,000 to $2,000,000) covers mobilisation and materials between draws. A merchant cash advance or working capital loan funds same day to 48 hours when the need is immediate. Minimum: 12 months trading, ~$20,000+ monthly revenue, 500 FICO.
The 2026 Squeeze, in Numbers
The Associated General Contractors of America tracks both sides of the contractor’s margin. In the twelve months to June 2026 the producer price index for inputs to new nonresidential construction climbed 7.1%, while the index for what contractors say their bid price would be rose just 3.5% — less than half.1 That gap is the whole problem: a contractor absorbing it is financing the client’s project out of their own working capital.
The material detail matters for anyone buying ahead. Year over year to June 2026: aluminium 52.4% higher, copper and brass mill shapes 26.0%, steel mill products 16.9%, and diesel 65.8% higher than a year earlier despite an 18.4% fall in June alone.1
Financing availability is itself a reported obstacle in this trade. 34% of firms report that project financing was unavailable or too expensive, 37% cite lack of funding or uncertainty about the funding source, and 63% say an owner postponed or cancelled a project in the past six months.2 If a client’s financing is shaky, your receivable is too — which is an argument for invoice financing over borrowing against your own balance sheet.
Demand context: total construction spending ran at a $2,157.6 billion seasonally adjusted annual rate in July 2026, 3.8% below July 2025.3 Labour remains the constraint, with 82% of firms reporting difficulty filling hourly craft positions and 63% still expecting to add headcount in 2026.2
Retainage and Progress Billing
Retainage — the portion of each payment the owner holds until the job is complete — is customarily 5% or 10% of the contract value. On a $400,000 job at 10%, that is $40,000 of your own profit sitting in someone else’s account until closeout, on top of the normal lag between submitting a progress billing and being paid.
Two structures address that directly rather than papering over it:
- Invoice and receivables financing advances against the billing you have already submitted. Because it is underwritten largely on the credit of the party who owes you, it is often available when your own credit file is thin. Facilities run $20,000 to $5,000,000, terms up to 36 months, typically funded within a week.
- A business line of credit is drawn for mobilisation and materials and repaid when the draw lands, then drawn again on the next job. You pay only for what you use, which suits a business with several jobs at different stages.
Which Product Fits Which Problem
| The problem | Product | Terms |
|---|---|---|
| Progress billing submitted, payment 30 to 90 days out | Invoice and receivables financing | $20K – $5M, up to 36 months |
| Materials and mobilisation before the first draw | Business line of credit | $10K – $2M, 12 to 36 months |
| Excavator, lift, truck, tooling | Equipment financing | Full purchase amount, 1 to 5 years |
| Payroll this Friday | Working capital loan or advance | $10K – $1M, same day to 48 hours |
| Yard, shop or long-term expansion | Term loan or SBA | Longer terms, lower rates, 680+ FICO and 2 years for SBA |
What a Contractor Needs to Qualify
- 12 months in operation and at least $20,000 a month in revenue for revenue-based products
- 500 FICO for an advance or working capital loan; 650+ for a line of credit
- For invoice financing: invoices to commercial or government customers, not consumers
- Business bank statements Typically 3 months; some states require 4.
- Government-issued photo ID and a voided business check
About five minutes to apply, soft pull only, no fee and no obligation.
October 2026 Update: Rates, Approval Odds and Costs
Three things changed since this guide was last reviewed, and all three affect the numbers above.
- Prime is 7.00%, up from 6.75% on September 17, 2026, after the Federal Reserve’s first hike since 2023. Variable products (bank lines, SBA 7(a) loans, HELOCs) repriced a quarter point; fixed-rate and factor-rate products you already hold did not. The next Fed decision is October 28. See prime rate is 7%: what it means for business loan rates.
- New approval data: the Federal Reserve’s 2026 Small Business Credit Survey found 81% of applicants approved for at least part of their request and 42% in full; equipment loans (71%), merchant cash advances (48%) and lines of credit (45%) were approved in full most often, SBA (37%) and term loans (35%) least. See business loan approval rates in 2026 and easiest business loans to get.
- Cost pressure: 77% of small employers report rising costs and 47% cite tariffs; NFIB puts the average short-term loan rate at 8.2% (September 2026). The cheapest-tool-first playbook is in tariffs and small business working capital.
Contractor Deals Funded Through RAN Funding
Two contractor files placed through RAN Funding, both above $500,000. Business names are removed; amounts and outcomes are real. More in funded deals.
$600,000 for a Concrete Restoration Contractor
- Funded
- $600,000
- Detail
- Large project
Outcome: Capital to mobilize a project the contractor had already won.
$550,000 for an Electrical and Plumbing Company
- Funded
- $550,000
- Detail
- Contractor
Outcome: Capacity to take on jobs bigger than the company’s bank account.
Common Questions
Can I borrow against unpaid progress billings?
Yes. Invoice and receivables financing advances against invoices you have already issued, on facilities from $20,000 to $5,000,000 over terms up to 36 months, typically funded within a week. It is underwritten largely on the credit of the customer who owes you.
What financing covers retainage?
Retainage is a receivable, so invoice financing is the closest fit, though some funders exclude the retained portion until closeout. A line of credit is the more common way contractors carry retainage, because it can be drawn and repaid as jobs close.
Can a construction company with bad credit get funded?
Yes. Merchant cash advances and working capital loans accept scores from 500 with 12 months in business and at least $20,000 monthly revenue. Equipment financing widens approval further because the machine secures the deal. Invoice financing leans on your customers’ credit rather than yours.
Do I need to be licensed or bonded to qualify?
Licensing and bonding are trade requirements rather than financing requirements, but a funder will usually want to see that the work being billed is work you are licensed to perform. Bonding capacity is a separate product and is not what these facilities provide.
Is equipment financing available on used machinery?
Often yes, since the collateral is the asset and used equipment has an established resale market. The age, hours and make affect both the approval and the rate.
Sources
- Construction input costs remain sharply higher than a year ago — Associated General Contractors of America, 15 July 2026
- 2026 Construction Hiring and Business Outlook — Associated General Contractors of America, 8 January 2026
- Monthly Construction Spending, July 2026 — U.S. Census Bureau, 1 September 2026
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.