The average general contractor waits 83 days to get paid. Meanwhile, payroll runs every two weeks, your lumber supplier wants net-30, and your equipment payments don't care about a GC's approval queue. That gap — profitable job, empty account — is the defining financial reality of the construction business. It isn't bad management. It's structural. And there are funding tools built specifically for it, if you know which ones actually match how contractors get paid.
Why contractors run out of cash on jobs they're winning
Construction cash problems are almost always a timing problem, not a profit problem. You pay for labor, materials, and equipment upfront. Progress payments arrive weeks later. Retainage on top of that holds back another 5–10% until substantial completion — sometimes many months after your crew has moved on. The job looks great on paper. The bank account tells a different story.
Industry profit margins for general contractors typically run between 2% and 8% [CFMA]. When retainage is set at 10%, that withheld slice can exceed the entire projected profit on a job. For subcontractors who finish their scope early in a multi-year project, the wait can stretch to a year or more before that final holdback is released. The money is earned. It just isn't accessible.
Consider a concrete subcontractor doing $3.5M a year. They carry 10% retainage across four active jobs. That's potentially $350,000 in completed, earned revenue sitting in limbo at any given time — not financing a vacation, not sitting in a savings account, just locked behind closeout paperwork. At a 5% net margin, that's the equivalent of two full years of profit tied up and unavailable for the next mobilization.
The three timing gaps that stack on each other
- Mobilization gap: You spend $150K–$200K on a large project before your first pay application is even submitted.
- Billing cycle gap: Progress payments are typically invoiced monthly, then reviewed, then paid — adding 30–45 days before cash hits your account.
- Retainage gap: 5%–10% of contract value is withheld until final completion, punch list sign-off, lien waiver submission, and owner acceptance — each step a potential delay.
A $5M contractor carrying 10% retainage across active jobs could have $300K–$500K of earned revenue completely inaccessible at any point in time. That money is yours. You just can't touch it yet.
The 2026 lending environment is not making this easier for contractors
Banks are tightening, not loosening, for construction businesses right now. The Federal Reserve's January 2026 Senior Loan Officer Opinion Survey reported that banks tightened C&I lending standards for firms of all sizes, and specifically flagged that modest net shares of banks expect to further tighten standards for construction and land development loans over 2026 [Fed SLOOS]. If you've been turned down or under-approved by your bank recently, it isn't personal — it's policy.
At the same time, the Federal Reserve's 2025 Small Business Credit Survey (published in early 2026) found that 60% of firms that borrowed from online lenders reported actual costs were higher than expected [Fed SBCS]. That's the cautionary number. Fast capital is available, but 'available' and 'well-priced for your payment cycle' are two very different things — especially in construction.
There's one meaningful bright spot. In March 2026, the SBA highlighted availability of its 7(a) Working Capital Pilot (WCP) Program specifically for builders and general contractors — offering project-based lines of credit up to $5 million and up to 100% financing of direct project costs including labor, materials, and subcontractor payments [SBA]. The current prime rate sits at 6.75% as of May 2026, which puts SBA 7(a) variable rate maximums in the 9.75%–14.75% range depending on loan size and term [SBA 7a rates]. Compared to alternative funding, that spread matters.
Which funding types actually fit how contractors get paid
Not every funding product is built for project-based, lump-sum payment cycles. Some tools are genuinely useful for contractors. Others are designed for businesses that collect revenue every single day — and they will hurt you if your deposits come in chunks. Here's an honest breakdown of what works, what's situational, and what to avoid.
| Funding Type | Best Fit for Contractors | Watch Out For | Typical Cost (2026) |
|---|---|---|---|
| SBA 7(a) Working Capital / CAPLine | Ongoing working capital, mobilization costs, multi-project bridge | 60–90 day approval timeline; collateral often required | ~9.75%–14.75% APR [SBA] |
| Business Line of Credit (Bank) | Payroll and materials between billing cycles; draw-and-repay flexibility | Strong credit and financials required; tightening standards in 2026 | Prime + 1%–3% for well-qualified borrowers |
| Invoice Factoring / AR Financing | Converting approved invoices into immediate cash; works with progress billing | Factoring fees of 1%–5% per 30 days; client notification sometimes required | Effective APR 12%–60% depending on speed and terms |
| Revenue-Based / MCA (ACH-drawn) | Short-term emergency bridge when a specific receivable is 30–45 days out | Daily ACH pulls continue whether client pays or not — dangerous in slow billing months | Factor rate 1.25–1.45 typical for construction [industry data]; effective APR can exceed 80% |
| Equipment Financing | Trucks, lifts, excavators tied to a specific job or fleet need | Asset-specific; doesn't address operating cash or payroll gaps | 7%–15% depending on equipment age and credit |
The SBA CAPLine programs: underused by contractors who need them most
The SBA's CAPLine umbrella includes a Contract CAPLine — a revolving or non-revolving facility that finances costs tied to one or more specific contracts, including labor, materials, overhead, and G&A allocable to those contracts [SBA CAPLines]. The Builders CAPLine does the same for GCs constructing or rehabilitating residential and commercial property. These are genuinely purpose-built tools for the pay-when-paid problem. Most contractors have never heard of them.
The honest truth about MCAs and construction: proceed with a clear head
A merchant cash advance is not automatically wrong for a contractor. It is, however, the product most likely to make your situation worse if you take it at the wrong moment or the wrong size. Here is what you need to know before signing anything.
MCAs are structured as the purchase of future receivables, not as loans [MCA Industry Report 2026]. The funder advances capital today in exchange for a larger fixed dollar amount repaid through daily or weekly ACH withdrawals from your bank account. The cost is expressed as a factor rate. Construction contractors typically land in the 1.25–1.45 factor rate range due to the industry's irregular deposit patterns and perceived risk [industry estimates]. The math on that: a $75,000 advance at a 1.35 factor = $101,250 total repayment. Paid back over five months via daily ACH, that's an effective APR north of 80%.
Here's the specific construction problem: the daily ACH pull does not care whether your GC paid their last draw request. If you took $75K to cover a payroll crunch while waiting on a $180K progress payment, and that payment gets delayed three weeks by an inspection hold, the MCA funder is still pulling $850–$1,200 per business day from your account. You can run out of operating cash before your receivable arrives.
An MCA makes the most sense for a contractor when: (1) a specific receivable is confirmed and expected within 30–45 days, (2) the advance amount is modest relative to that incoming payment, and (3) no other product can be secured in time. Outside those conditions, you're adding a new cash drain on top of the cash gap you're trying to fill.
When an MCA is the wrong choice for your contracting business
- You're in the first 60 days of a new job with no approved invoices in the pipeline yet — daily pulls will drain mobilization cash.
- You're already carrying one MCA — stacking advances is how contractors end up in default spirals, not out of them.
- Your billing cycle is monthly and the payment approval process runs 45+ days — the advance will be partially or fully repaid before you collect.
- The job has a disputed change order or lien risk that could delay final payment indefinitely.
- Your gross margin on the contract is under 12% — at that margin, MCA costs can eat the entire profit on a job.
How to time a funding draw against your payment cycle
Timing a capital draw well is the difference between a funding tool that helps and one that compounds the problem. The core rule: draw capital closest to when you have confirmed, documented receivables on the way. The further you are from a real payment event, the more expensive and risky your funding decision becomes.
- Map your next 90 days of cash. List every expected progress payment, its approximate date, and the approval steps between now and collection. A 13-week rolling cash forecast — even a basic spreadsheet — shows exactly when the gap hits and how wide it actually is.
- Identify the specific receivable backing your draw. 'We have $220K pending on a submitted pay application, GC historically pays within 40 days' is a fundable story. 'We need cash for an upcoming job' is not a fundable story — and it means you're taking on cost today against future revenue that isn't confirmed.
- Match the product to the timeline. A 90-day gap is a line of credit or invoice factoring situation. A 30-day confirmed receivable can support a short-term bridge. A 12-month expansion need is an SBA 7(a) situation. Don't use a daily-repayment instrument to solve a long-cycle problem.
- Pre-position your paperwork before the crunch hits. MCA approvals can happen in 24–48 hours; SBA approvals take 60–90 days. If you wait until the account is negative, your only option is the most expensive one.
- Watch your retainage release schedule as a funding event, not just an accounting entry. A $280K retainage release expected in 45 days can serve as collateral for an invoice factoring arrangement or inform the size of a short-term bridge draw.
One thing most brokers won't tell you about construction funding
The 2025 Federal Reserve SBCS found that one-third of small businesses faced a funding gap even after applying for financing [Fed SBCS]. In construction, that rejection often isn't about the business being unhealthy — it's about lenders misreading lumpy deposit patterns as instability. A contractor who billed $80K in March, $35K in April, and $120K in May isn't struggling. That's how construction works. Projects close at different times.
At FynFund, we work across 100+ MCA and loan funders, and we see this misread constantly. The fix is positioning: showing providers current contracts, backlog value, recurring client relationships, and contractor licensing — all of which signal 'professional operation' to a funder who would otherwise see 'inconsistent deposits.' Your licensing and bonding documentation are underwriting assets, not just legal requirements. Use them.
California contractors have a specific 2026 development worth knowing: under SB 61, which took effect January 1, 2026, private construction contracts are now capped at 5% retention, down from the previous 10% industry norm [CA SB 61]. On a $2M contract, that's $100,000 of previously locked cash now available during active project phases. If you're in California and haven't renegotiated in-progress private contracts signed after January 1, that conversation is worth having.
