Working Capital Solutions for Contractors: Find Your Funding Path by Credit Profile

Choose your path

Your credit score, time in business, and current cash position determine which funding option will approve fastest and cost least. Use the links below to jump straight to the guide for your situation — no generic overview needed.

Key differences

Credit profile drives both availability and cost. Contractors with 700+ credit can access traditional bank term loans at rates around 8–12% APR; those below 650 typically pay 15–25% APR through specialized lenders but still qualify. The gap isn't just interest — it's approval timeline. Prime-credit borrowers wait 2–4 weeks for bank underwriting; subprime applicants often fund in 3–5 business days through online lenders or factoring platforms.

Working capital tools split into four categories:

• Term loans and lines of credit suit contractors with steady revenue and 6+ months operating history. A business line of credit lets you draw only what you need and pay interest on the balance — useful for materials that arrive mid-project. Term loans lock in a fixed rate and schedule but require predictable cash flow to service.

• Invoice factoring moves cash immediately without a loan. You sell unpaid invoices at a discount (typically 2–5% for construction); the factor funds within 24–48 hours and handles collection. This works for subcontractors waiting 30–60 days on general contractor payments. No credit score check; qualification is based on invoice value and customer creditworthiness.

• Bridge loans cover the gap between project start and payment. Contractors borrowing against incoming work (not completed work) can access 60–80% of projected revenue for 30–180 days at higher rates (12–20% APR) but with minimal underwriting friction.

• Equipment financing separates from working capital but solves a parallel problem. If you need tools or machinery, asset-backed loans typically run 8–14% APR for prime borrowers and are faster to approve than unsecured term loans because the equipment secures the lender's risk.

New contractors and startups under 6 months face a separate market. SBA microloans and specialized startup lenders offer $10k–$50k at 15–25% APR but require a detailed business plan and often a co-signer. Factoring remains open to them if they have invoices.

Approval thresholds vary sharply. Banks typically require $50k+ annual revenue, 620+ credit, and 2+ years in business. Online lenders drop the revenue floor to $30k and time-in-business to 6 months but charge more. Factors care only that your customers (GCs or property managers) are creditworthy — your personal credit is irrelevant. Bridge lenders sit in the middle: they want proof of the incoming project contract and will work with 580+ credit if your project pipeline is strong.

Speed is the hidden trade-off. Fastest routes: invoice factoring (24–48 hours), online term loans (3–7 days), bridge loans (5–10 days). Slowest: SBA loans (4–8 weeks), bank term loans (3–4 weeks). If you're out of cash now, factoring or a bridge loan are your only real options. If you can wait, a traditional term loan or line of credit usually costs 3–5 percentage points less.

Common trap: confusing availability with affordability. You might qualify for a 24% APR online loan in 2 days, but if your project margins are 15–20%, that loan eats profit. Spend the extra week getting quotes from three lenders in your credit tier before accepting the first approval.