Business Line of Credit for Construction Companies — 2026
Construction businesses face a specific cash-flow problem that a line of credit is structurally designed to solve: the gap between when costs hit (mobilization deposits, early-phase subcontractor payments, materials orders) and when revenue arrives (draw invoices that pay 30–90 days after submission). A general contractor landing a $600,000 commercial build-out may need $40,000–$80,000 in working capital before the first draw is approved — and that capital need repeats on every new project. A term loan is wrong for this: you'd be paying interest on a fixed lump sum between projects when you don't need it. A line of credit is right: draw at project start, repay when the GC's customer pays, and the credit resets for the next job.
Non-bank lines to $250K; bank-tier lines to $500K+ for established contractors
Non-bank lines typically 1–7 days; bank-tier lines 2–6 weeks
You pay nothing on the undrawn portion — cost is proportional to use
Non-bank lines; bank-tier lines typically require 24+ months and profitability
Retainage float is the second primary construction LOC use case. Most commercial contracts hold back 5–10% of each draw as retainage until project completion and punch-list clearance — sometimes a 90–180 day hold on a material percentage of earned revenue. A contractor with $500,000 in completed work may be owed $35,000–$50,000 in retainage still in the owner's hands. A line of credit bridges that gap without locking the contractor into a fixed-amortization product. Revolving access lets the contractor draw when retainage is outstanding and repay when it releases — paying interest only on the outstanding days.
Frequently asked questions
What documents does a construction company need for a line of credit? +
Non-bank lines: 3–6 months of business bank statements, owner ID, voided business check, basic business info (EIN, time in business). For larger lines or bank-tier approval: last 2 years of business tax returns, YTD profit & loss, balance sheet, aging receivables schedule by customer, and current debt schedule. Contractor license and proof of insurance are often requested. A project backlog summary (signed contracts vs. bid/spec work) can strengthen a bank-tier application significantly.
Can a construction company get a line of credit in the first year of business? +
It's difficult. Most non-bank lines require 12+ months in business; bank-tier lines require 24+ months and profitable financials. With under 12 months TIB, the most accessible working capital options are revenue-based financing (MCA) for fast bridge capital and equipment financing for specific asset purchases. If the business has 6–12 months of strong deposit history, some non-bank lenders will consider a small line ($10K–$50K) — the deposit consistency and absence of NSFs carry a lot of weight.
How is a construction line of credit different from a project loan? +
A construction line of credit is a revolving business facility that's not tied to a specific project — you draw from it for any business purpose, repay, and redraw. A project-based construction loan (common in real estate development) is a fixed-term facility tied to a specific construction project, with disbursements tied to construction milestones and a conversion to permanent financing at project completion. For most general contractors and trades, the revolving business line of credit is the right product — the project-based construction loan is for developers and builders, not trade contractors.
Does retainage affect a contractor's ability to get a line of credit? +
Retainage outstanding doesn't disqualify a contractor — lenders that specialize in construction understand it. In fact, a clean aging receivables schedule showing retainage owed by creditworthy GCs or project owners can be a positive underwriting signal (it demonstrates completed billable work). What lenders flag is retainage that's overdue past 90–120 days, especially from a single concentrated customer, which signals a slow-pay or dispute situation.
What's a typical interest rate on a line of credit for a construction company? +
Non-bank / broker-network lines typically run 15–45% APR depending on credit, time in business, and deposit strength. Bank-tier lines run 7–18% APR (variable, typically Prime + spread). The critical difference: you only pay interest on what you actually draw. A $100K line at 30% APR with $30K drawn for 45 days costs roughly $1,110 — not $30,000 annually. Run the math on your expected draw pattern, not the full line limit.
Sources & citations
https://clearvaluelending.com/industries/construction/line-of-credit