Construction
Construction Financing for Contractors
Contractors finance the gap between paying for labor and materials and getting paid on pay applications, which often takes 45 to 60 days plus retainage. Sagamore, a commercial loan broker, matches established contractors in all 50 states with lenders for lines of credit, term loans, equipment financing and invoice factoring.
Written by Jordan Levy, Founder & CEO · Last updated
How do contractors cover payroll while pay apps are outstanding?
- Who it's for
- General contractors and subcontractors billing monthly progress payments on commercial, residential or public jobs.
- The problem
- Crews get paid every Friday, but a pay application submitted at month end can take 45 to 60 days to clear the owner, the architect and the construction lender, and retainage is held back until closeout. With two or three jobs running, several payrolls can be out before the first check arrives.
- What fits
- A line of credit is the usual answer: draw for payroll when a pay app goes out, repay when it clears, and draw again on the next job. Contractors billing creditworthy GCs or public owners can also factor approved pay apps instead of waiting on them.
Products that fit
How do contractors fund the start of a new project?
- Who it's for
- Contractors who have won a bid and need cash before the first draw: mobilization, site setup, permits, insurance and deposits on long-lead items.
- The problem
- Most contracts pay nothing until the first pay app is approved, but mobilization costs and deposits on items like switchgear, windows or structural steel come due in the first weeks. A job larger than usual also thins the bank balance a surety looks at when bonding the next one.
- What fits
- A term loan covers a defined mobilization budget with fixed payments over the life of the job. A bridge loan fits a short gap with a known payoff, such as a deposit due before a large draw or a retainage release. A line of credit handles the smaller, recurring version.
Products that fit
How can contractors finance materials?
- Who it's for
- Trades that buy heavy material up front: framers, roofers, concrete and masonry, electrical, plumbing and mechanical subs.
- The problem
- Supplier terms run 30 days, often less on a new account, while the pay app that includes those materials pays in 45 to 60. Lumber, steel and copper prices move, so buying early to lock a price ties up even more cash.
- What fits
- A line of credit pays suppliers on time or early, then repays when the job draw arrives. For one large purchase, such as the material for a whole phase, a term loan matches the payments to the job's schedule.
Products that fit
How do contractors finance equipment and trucks?
- Who it's for
- Contractors adding or replacing excavators, skid steers, aerial lifts, dump trucks, trailers or work vans.
- The problem
- Renting a machine for a long job can cost more than owning it, but paying cash for an excavator drains the working capital that payroll and materials depend on.
- What fits
- Equipment financing uses the machine as collateral, so the down payment is usually small and the payments run over its useful life. Lenders finance new and used equipment, from dealers, auctions and in many cases private sellers. A term loan covers attachments, upfitting and anything that doesn't qualify as collateral.
Products that fit
How does invoice factoring work for contractors?
- Who it's for
- Subcontractors and service contractors whose customers are larger GCs, property managers or public agencies that pay slowly but reliably.
- The problem
- The work is done and invoiced, but the GC pays when it gets paid, and that chain can stretch past 60 days. Growth makes it worse: every new job adds receivables before it adds cash.
- What fits
- Factoring sells approved invoices for an advance within days, with the balance, less the fee, paid when your customer pays. Approval leans on your customer's credit more than yours. Most factors won't advance against retainage until it is billed for release. AR financing is the alternative if you would rather borrow against receivables and keep collecting them yourself.
Products that fit
Eligibility
What do you need to qualify?
Sagamore is a broker, not a lender. One application is matched with lenders across all 50 states, and every program starts from the same minimums. We work with established businesses only, so startups are not eligible.
- Credit score
- 600+
- Time in business
- 1+ year
- Annual revenue
- $400K+
Frequently Asked Questions
Common questions about construction financing
Yes. Contractors with at least a year in business, a 600+ credit score and $400K+ in annual revenue can qualify for a line of credit sized to their billings. Lenders review bank statements and receivables, and often the contracts behind them. Draw when payroll is due and repay when pay apps clear.
Often, yes, once the GC or owner has approved the pay app. Factors look at your customer's payment history and the contract terms. Retainage is usually excluded until it is released, and some public jobs need the agency to acknowledge the assignment.
Often a small one, and sometimes none, because the equipment secures the loan. The amount depends on your credit, your time in business and whether the machine is new or used.
No. Every program Sagamore brokers needs at least one year in business, a 600+ credit score and $400K+ in annual revenue. Contractors who meet those minimums can apply once and be matched with several lenders.
Guides
Which guides cover construction financing?
- Line of Credit for Contractors: How It Works and How Much You NeedHow a line of credit for contractors covers materials and payroll between pay apps, how to size it, and what lenders check before they approve one.
- Invoice Factoring for Construction Companies: Pay Apps, Retainage, and Lien WaiversHow invoice factoring for construction companies works with progress billing, retainage, and pay-when-paid clauses, and what a factor will and won't fund.
- Loan for Construction Materials: How Contractors Pay Suppliers Before the Job PaysYour options for a loan for construction materials: credit lines, term loans, supplier terms, and stored-materials billing, with a worked lumber package.
- Heavy Equipment Financing Companies: Who They Are and What They Look ForHow heavy equipment financing companies differ, what they check on you and the machine, and how to compare offers on excavators, dozers, and trucks.
- How Construction Contractors Finance Equipment, Materials, and Slow-Paying JobsHow contractors match equipment financing, credit lines, and factoring to the cash gaps retainage, progress billing, and pay-when-paid clauses create.
- Can You Use a Business Loan to Cover Payroll?Payroll is a standard use of business financing. Which products fit, how fast each funds, what it costs, and when borrowing for payroll is a warning sign.
- How Does Invoice Factoring Work? Advance Rates, Reserves, and Fees ExplainedInvoice factoring step by step: how the advance rate, reserve, and fee work, with a worked $50,000 example and what it costs at different payment dates.
- Should You Finance or Lease Business Equipment? Costs, Taxes, and Section 179 in 2026Financing builds ownership; leasing lowers monthly cost. A 5-year cost comparison, how the two lease types differ, and 2026 Section 179 limits.
- Invoice Factoring vs. Accounts Receivable Financing: What's the Difference?Factoring sells your invoices; AR financing borrows against them. Compare control, cost, customer visibility, and qualification, with a worked example.
By state
Which state guides cover construction financing?
Each state guide covers its disclosure law, SBA offices and state loan programs. All state guides
Related Funding Options
Which funding options fit construction?
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