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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.
A month, roughlyTiming only — no amounts
Progress drawsMaterials and subs

You pay for the job in full before you are paid for any of it, twice over on a long one. The draws are large and far apart; the costs are neither.

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.

Engineering team analyzing blueprints together at an outdoor construction site with safety gear.

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.
Six months of statements, read
  1. 1Revenue, and how longThe monthly average, and the years behind it
  2. 2The cash cushionAverage daily balance, against a month of revenue
  3. 3Bounced paymentsNSF and returned items over ninety days
4
What you already pay lenders

Totalled against monthly revenue and capped at 20% — the ceiling we pre-qualify to. This is the one that binds: two advances already running leaves less room than none, however good the rest looks.

already committedroom left
020% of monthly revenue

The split shown is an example, not your file. Yours is read by a person, from your own statements.

The whole method, on one page →

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. What you already pay other lenders matters as much as what you are asking for, and you need an average of at least $20,000 a month to qualify at all.

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
The standard file, in detail →What your province calls its incorporation papers →

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. Security usually prices better than an unsecured facility.

$50,000 – $2,000,000

Revenue-based line of credit

Draw what you need, pay for what you draw, and the limit moves with your revenue. For months that are uneven, not 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

See what you qualify forAbout ten minutes · no hard credit pull

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
The funding step of a Spark application: an amount entered, and a one-line box saying what the money is for.

Any of these is one sentence in the box that asks what the money is for.

Said on the way in it costs you nothing. Found in the statements by somebody who then has to ask, it costs a day.

Questions

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.

Still deciding? Talk to a specialist — no application required.

Worth reading next

Other trades

See what you qualify for.

About ten minutes, most of it finding your statements. Applying never touches your credit score.

Takes about ten minutes, and applying never touches your credit score.