Financing for construction firms
You fund the job, then bill for it, then wait. Holdback makes the wait longer, and that is the shape of most construction files.
How the money reads
An underwriter reads six months of statements. This is what yours usually says.
- Progress billing means deposits arrive in large, irregular chunks.
- Materials and subs are paid long before the draw clears.
- Holdback sits on the other side of completion, which is exactly where the strain is.
The thing that slows these files down
An underwriter reading three big deposits in six months wants to know what is signed and what is coming. A one-line note about the current book of work answers it before it is asked.
What it usually pays for
- Materials and labour on a job already won
- Equipment — an excavator, a skid steer, a truck
- Covering holdback until it releases
What an underwriter asks
The same four things decide every file: revenue and how long you have been making it, the cash cushion, bounced payments, and what you already pay other lenders. Here is what those look like in this trade.
- What is signed but not yet billed?
- Six months of statements show what has been paid, not what has been won. Three large deposits with nothing between them raises a question that one line about the current book of work answers.
- How much is sitting in holdback?
- Holdback is money you have earned and cannot touch. It is the single most common reason a profitable contractor is short of cash, and it is worth naming rather than leaving it to be inferred.
- What do the subs and suppliers cost before a draw clears?
- The gap between paying the trade and being paid for it is the shape of a construction file. The cushion — your average daily balance against a month of revenue — is what a lender reads to judge whether you can carry it.
The whole method, in one page: giving yourself the best shot.
Asking for the right amount
Size it against the job, not the year. Materials and labour on a contract you have already won is a use of funds an underwriter can price; a round number for working capital is not.
Across every trade the anchor is the same: roughly a month of revenue, and never more than the statements support. Everything you already pay lenders counts toward a ceiling of 20% of monthly revenue, so what is already running matters as much as what you are asking for.
When to ask
Ask before the job starts, not once the materials are on account. A file put in while suppliers are already past thirty days is a harder file, and it is the same business either way.
Have these ready as well
On top of the standard file — six months of statements, your incorporation documents, your CRA business number and photo ID.
- Your contractor or trade licence, where the province requires one
- The contract or purchase order for the job being funded
- WSIB or provincial workers' compensation clearance
- Certificates of insurance, including any the general contractor requires
What usually fits
In this order, more often than not — though the file decides, not the trade.
Asset-based lending
Your receivables, inventory or equipment doing some work while you still hold them. Usually the cheapest money on this page.
$50,000 – $2,000,000
Revenue-based line of credit
Draw what you need, pay for what you draw, and the limit moves with what you turn over. For months that are uneven rather than short.
Up to $500,000
Equipment financing
The oven, the van, the line. Financed against the thing itself, so the payment sits against what the thing earns.
$10,000 – $1,000,000
Where these files get harder
None of these is an automatic no. They are the things that turn a one-day decision into a conversation, and all of them are better said by you than found by an underwriter.
- Revenue from a single general contractor
- Liens registered against past work
- Statements showing large deposits and nothing else, with no note explaining the book behind them
Questions
- Can you fund the holdback?
- Sometimes, depending on the contract and who owes it. It is one of the more common reasons a contractor comes to us, and it usually takes the shape of a line of credit rather than a term loan.
- I have one big client. Does that hurt?
- It is a question rather than a decline. A concentration that comes with a signed long-term contract reads very differently from one that does not.
- Can I finance an excavator I am buying used?
- Yes. Equipment financing covers used machines; the age and the hours affect the term more than they affect the answer.
- Do you need my job costing?
- No. The decision is made from the bank statements. A one-line note about what is signed is worth more here than a spreadsheet.