6 min read
Why Construction Companies Need Working Capital (and How to Get It)
By Christopher Chavez, Founder — Northwood Capital Group
Construction companies don't fail because the work isn't there. They fail because the money comes in 90 days after the work is done — and payroll comes every Friday. That timing gap is exactly why construction companies need working capital, and why contractors are the most underfunded profitable businesses in the country.
The five reasons construction runs short on cash
- Slow client payments — net-30 to net-90 terms on progress billing, and general contractors routinely stretch past the due date
- Retainage — 5–10% of every payment held until final completion, sometimes for months after the job is done
- Weekly payroll — crews get paid every week whether or not the client has paid you
- Materials paid on delivery — suppliers want COD or card payment while your receivable sits unpaid
- Mobilization costs — permits, bonding, insurance, and equipment moves all come out of pocket before the first progress check clears
When working capital funding makes sense for a contractor
| Situation | Right tool | Why |
|---|---|---|
| One slow-paying project is strangling cash | Working capital term loan | Fixed payment bridges the float until the check lands |
| Every new job needs materials and crews upfront | Business line of credit | Draw against each contract, repay as clients pay |
| Want to bid bigger jobs but can't float them | Term loan or higher credit line | Coverage to mobilize before the first payment arrives |
| Buying a machine (excavator, skid steer, trucks) | Equipment financing | The machine secures the loan — lower rate, longer term |
| Materials discount for paying cash | Line of credit draw | Cash-price discounts often beat the cost of a short draw |
For defined equipment purchases, dedicated construction equipment financing is the cheaper tool — the machine secures the loan. Working capital funding is the right answer when the need is cash itself: payroll, materials, retainage gaps, and the float between jobs.
What it costs and what it takes
Term loans for established contractors typically fund $25,000–$500,000 at fixed rates, repaid over one to five years, with no prepayment penalty. Approval rests on the business's bank deposits — six months of statements showing consistent weekly revenue — plus a 500+ owner credit score for many programs. Because lenders underwrite cash flow instead of tax returns, contractors with write-downs on paper and thin personal credit still qualify. We fund construction businesses in all 50 states, including Texas and Florida.
Get working capital for your construction company
Northwood Capital Group funds contractors nationwide — term loans, lines of credit, and equipment financing under one roof, with decisions in 24–48 hours and no upfront fees. Start on the application page, browse our working capital programs, see construction equipment financing, or call (714) 679-8886.