I run a construction business. How can I fund materials, labor and equipment between progress payments?
Deposits, supplier credit, SBA Builders and Contract CAPLines, equipment finance and invoice lines, cheapest first.
Construction businesses pay for labor, materials, subcontractors and plant weeks or months before each progress payment or final retainage comes in. That cash gap is widest when you take on a bigger job, start several jobs at once, or build to sell.
- SBA lines of credit built for contractors: under its 7(a) CAPLines program (up to $5 million and up to 10 years), the SBA guarantees two lines aimed at construction work. A Builders CAPLine is for small general contractors building or renovating homes or commercial buildings to sell. A Contract CAPLine pays the direct labor and material costs of one or more specific contracts, for a business with a record of completing similar contracts at a profit; the customer normally pays the lender directly.
- Commercial construction loans: when a business borrows from a bank to build or develop commercial property, federal bank regulators set supervisory loan-to-value ceilings of 80% for commercial construction and 75% for land development (compared with 85% for a finished commercial building), so you should expect to put in at least 20% to 25% of the project's value yourself.
- Invoices vs progress applications: standard invoice factoring and accounts receivable lines work best on completed work billed on clear payment terms. Many lenders will not advance against uncertified applications for payment, stage billings that can be clawed back if work is not finished, or retainage held until completion.
- Federal construction contracts: on a federal construction contract, the Prompt Payment clause normally requires the agency to pay an approved progress payment request within 14 days after the designated billing office receives it, and to pay interest automatically if it pays late.
24 routes to look at, cheapest first
Compare the first 4 side by side- L0
Free or nearly free
Little or no cash cost, though most take time and admin. Some bring money in, and a few have small fees.- Own cash and no-cost
Customer prepayments, deposits and pre-orders
Ask customers to pay some or all of the price before you deliver. The cash comes in before your costs go out, so you need to borrow less, but until you deliver you owe customers the goods or their money back.
Days - Own cash and no-cost
Late fees and Prompt Payment Act interest
Getting paid what you are owed, sooner: interest that federal agencies must add when they pay you late, and late fees you write into your contracts with private customers. It costs nothing to claim, but it only works if your paperwork and terms are in order.
DaysNot a raise - Own cash and no-cost
Supplier trade credit
Your suppliers let you pay for goods or services some time after you receive them, often 30 or 60 days later. Usually free if you pay on time, but giving up an early-payment discount can make it expensive.
Weeks - Supplier and buyer-led finance
Federal contract financing
Payments a federal agency makes to its contractor before delivery, as costs are incurred or milestones are met, plus the right to assign contract payments to a bank as security. No separate charge, but it has to be in the contract, and it is meant to show up in a lower price.
Weeks
- Own cash and no-cost
- L1
Very cheap or subsidised
Borrowing on better terms than the market, usually because a public body, community lender or large buyer is involved.- Government-backed and community lending
Community development lenders (CDFIs)
Loans from community development financial institutions: mission-driven lenders certified by the US Treasury that serve low-income communities and people who find it hard to get finance elsewhere, often with advice alongside.
WeeksPersonal guarantee likely - Government-backed and community lending
SBA 504 loans
Long-term, fixed-rate financing for buildings, land and long-life equipment, split between a bank and a nonprofit Certified Development Company backed by the SBA. You usually put in 10% yourself.
MonthsUp to $5.5mPersonal guarantee likely - Government-backed and community lending
SBA Microloans
A small business loan of up to $50,000 from a nonprofit community lender that the SBA funds, for working capital, supplies and equipment. The average is about $13,000.
WeeksUp to $50kPersonal guarantee likely - Supplier and buyer-led finance
Supply chain finance (supplier finance programs)
A large customer sets up a program with a bank or finance company so that you can choose to have its approved invoices paid early, for a charge, instead of waiting until the payment date.
Days
- Government-backed and community lending
- L2
Mainstream secured debt
Standard borrowing from banks, credit unions and mainstream lenders, often secured on assets or backed by a personal guarantee.- Government-backed and community lending
EXIM working capital guarantees and export credit insurance
The Export-Import Bank of the United States (EXIM) guarantees 90% of a bank's working capital loan to an exporter, and insures exporters against foreign customers not paying. Its authority to take on new business ends on December 31, 2026 unless Congress extends it.
Weeks - Government-backed and community lending
SBA 7(a) loans
A business loan of up to $5 million from a bank or other lender, with part of it guaranteed by the SBA, for businesses that cannot get the credit they need on reasonable terms elsewhere.
MonthsUp to $5mPersonal guarantee likely - Government-backed and community lending
SBA export loans
Bank loans and lines of credit of up to $5 million for small businesses that sell outside the US, with the SBA guaranteeing up to 90% so lenders take on export risks they would otherwise turn down.
WeeksUp to $5mPersonal guarantee likely - Government-backed and community lending
SBA Express loans
A loan or line of credit of up to $500,000 from a bank or other lender with SBA Express authority. The lender decides under its own procedures and the SBA guarantees half, so there is less SBA paperwork than a standard 7(a) loan, but the same rate caps and the same rules on who can borrow.
WeeksUp to $500kPersonal guarantee likely - Government-backed and community lending
SBA lines of credit (CAPLines and others)
Bank lines of credit of up to $5 million for working capital, contracts, seasonal peaks or building projects, with the SBA guaranteeing part so lenders will say yes. Rates are capped, but owners usually guarantee the line and the lender watches your receivables and inventory closely.
MonthsUp to $5mPersonal guarantee likely - Bank and mainstream debt
Bank and credit union term loans
A lump sum from a bank or credit union, repaid in fixed installments over an agreed term, usually one to five years. Usually cheaper than online lenders, but slower, and usually secured on assets with a personal guarantee.
WeeksPersonal guarantee likely - Bank and mainstream debt
Business credit cards
Revolving credit for everyday business costs, up to a limit. Free if you clear the balance each month, but expensive if you carry it, and most consumer credit card protections do not apply.
DaysPersonal guarantee likely - Bank and mainstream debt
Business line of credit
A credit limit from a bank, credit union or online lender that you can draw on, repay and draw again, for short-term costs such as inventory, payroll and seasonal gaps.
WeeksPersonal guarantee likely - Bank and mainstream debt
Equipment leasing and sale-leaseback
Paying to use equipment that a lessor owns, with options to buy it at the end, or selling equipment you already own to a lessor and leasing it back to raise cash. Little or no deposit, but you may pay more in total and own nothing at the end.
Weeks - Bank and mainstream debt
Equipment loans and finance agreements
A loan or finance agreement to buy machinery, vehicles or other equipment now and pay for it over time. The equipment itself usually secures the deal, and tax rules can let you write off much of the cost in the first year.
Weeks
- Government-backed and community lending
- L3
Specialist secured debt
Borrowing secured on specific assets such as invoices or inventory, with more fees and conditions than mainstream debt.- Asset-based and specialist lending
Accounts receivable financing
A loan or line of credit secured on your unpaid invoices. The invoices stay yours, you usually keep collecting from your customers, and how much you can borrow rises and falls with what they owe you.
Weeks - Asset-based and specialist lending
Asset-based lending
A revolving credit line secured on your receivables and inventory, where how much you can borrow moves with the value of those assets. Flexible for growing or seasonal businesses, but closely monitored and usually dearer than ordinary bank lending.
Weeks - Asset-based and specialist lending
Invoice factoring
A finance company (a factor) buys your unpaid invoices to other businesses at a discount, pays you for them before your customers do, and collects the money from your customers.
Days - Asset-based and specialist lending
Purchase order and contract financing
Money to fill a specific order or contract you have won but cannot afford to carry out, repaid when your customer pays. The SBA backs one version through banks; specialist finance companies offer others on their own terms.
WeeksUp to $5mPersonal guarantee likely - Asset-based and specialist lending
Spot factoring (single invoices)
Selling one unpaid invoice, or a few, to a factor for cash now, without signing up to sell it all your invoices. Useful for an occasional large invoice, but each deal is priced on its own.
Days
- Asset-based and specialist lending
- L4
Expensive or fast
Quick to arrange, often unsecured, and usually the most expensive way to borrow.
Worth knowing
- Before signing a factoring or receivables agreement, check in writing whether the lender will advance against staged payment applications and retainage, or only against final, certified invoices.
- Agree staged payments or mobilization deposits in the contract before work starts, and take supplier trade credit on materials so you are not funding the whole job out of your own cash.
- Finance excavators, vehicles and heavy plant with equipment loans or leases matched to their working life rather than paying for them out of your working-capital line.
- Check whether your business meets the SBA's size standard for your NAICS code (under sector 23, specialty trade contractors have a lower receipts cap than general building or heavy civil contractors).
Sources
- SBA: SOP 50 10 8.1, Lender and Development Company Loan Programs (effective October 1, 2026): Section B, Chapter 4 (CAPLines, including Builders and Contract CAPLines) · checked October 20, 2026
- OCC Comptroller's Handbook: Commercial Real Estate Lending (version 2.0, March 2022): construction loans and supervisory LTV limits · checked October 20, 2026
- 48 CFR 32.904 (FAR): determining payment due dates (including construction progress payments) · checked October 20, 2026
Facts about each route are sourced on its own page.