Why contractor funding is its own thing
Contractors face a cash flow problem unique to their industry: you pay for materials, labor, and permits before the job starts — but you don’t get paid until net-30, net-60, or sometimes net-90 after the job is done. On a 12-month contract that’s manageable; on a 4-week job at full capacity, it’s the difference between growing and stalling.
Three things make contractor lending different from other small business categories:
- Float gaps between billing cycles. You buy lumber Monday, your crew installs Tuesday-Friday, you invoice the customer Saturday, customer pays in 30-60 days. Banks see the gap as cash-flow risk; specialty lenders see it as a line-of-credit use case.
- 1099 subcontractors and crew variability. Most contractors run a small W-2 core plus a rotating cast of subs. Bank underwriting treats this as instability; experienced contractor lenders treat it as the operating model.
- Job-by-job revenue concentration. A $200K kitchen remodel followed by three weeks of small repairs can create monthly revenue swings of 5x. Banks see variance; we see the normal contractor calendar.
None of this disqualifies you from funding. It means you need lenders who actually fund contractors. That’s what we do.
The 5 funding products contractors actually use
Not every product works for every situation. The right one depends on what you’re funding, how fast you need it, and what your credit and revenue look like.
💰 Merchant Cash Advance
📋 Business Term Loan
🔧 Equipment Financing
🔄 Business Line of Credit
🏛️ SBA 7(a) Loan
The pattern: the easier a product is to qualify for, the faster it funds and the more it costs. The cheapest options (SBA, traditional term loan) take the longest and require the most. Contractors that need money in 48 hours rarely have time for an SBA loan; established businesses with 700 credit and three years of strong revenue rarely need to take an MCA.
Contractors funding by use case
Materials and labor before customer pays
The most common contractor funding need. A business line of credit is the cleanest solution: draw what you need to start the job, pay it back when the customer pays you, only pay interest on what you used. Cheaper than MCAs because it’s revolving against established cash flow.
Equipment and trucks
New work van, excavator, scissor lift, or HVAC diagnostic equipment. Equipment financing typically wins — the equipment serves as its own collateral, rates are lower than MCAs, and approval is 24–72 hours. For trucks specifically, dealer financing can sometimes beat us; we shop both.
Taking on a job bigger than your usual
You usually do $30K projects and a $150K opportunity lands. You need $40K up front for materials and labor before the first draw. Term loans or short-term loans win here on cost. For speed, an MCA tied to the project can work too.
Hiring or scaling crews
Bringing on two new W-2 employees means payroll obligation 90 days before you see new revenue. A line of credit or term loan covers the ramp-up period. We typically pair this with a project pipeline review to confirm the math works.
Acquiring a competitor or buying out a partner
SBA 7(a) loans win for acquisitions ($200K-$5M, 10-year amortization, 10-12% APR). Underwriting takes 60-90 days, but the lower cost almost always justifies the wait when buying an existing book of business. For partner buyouts under $250K, term loans can be faster.
Real contractors funding scenarios
Based on offers we’ve actually placed for contractors clients in the last 12 months.
Scenario 1 · Independent GC, residential
Scenario 2 · Electrical contractor, 6 trucks
Scenario 3 · HVAC service company
Scenario 4 · Commercial GC, 25 employees
What lenders actually look at
Contractors-specific underwriting goes beyond credit score. Here’s what moves an offer:
- Monthly deposits — the single most important number. Lenders pull 3–6 months of bank statements and average them. Consistency matters more than peak.
- NSF count in the last 90 days — three or more non-sufficient-funds events disqualifies you with most lenders, even at high revenue. Stay above water.
- Existing MCA balances — one active MCA is OK; two creates stacking concerns. More on MCA stacking.
- Tax liens or judgments — not an automatic disqualifier if you have a payment plan in place and can show it.
- Time in business — 6 months is the floor for MCAs, 12 for term loans, 24 for SBA. Operating history compounds.
Why use a broker for contractors funding
Going direct to one lender gives you one offer at that lender’s pricing. Going through a broker like The Broker Shop matches your file to the lenders whose guidelines you meet, generating competing offers that lower your factor rate or APR.
- Industry-specialty lenders. Some lenders specialize in contractors and price them better. You won’t find them on a Google search; we work with them daily.
- Time saved. A typical direct application takes 30–90 minutes plus document upload. One broker app takes ~2 minutes and shops everyone.
- Credit protection. Pre-qualifying through us uses a quick application.
- Our service is free. The lender pays our broker fee at close. You pay nothing extra.
More on this in our complete guide to how a business funding broker works.