Contractor Business Funding: How to Cover Payroll and Materials Between Draws Without Waiting 45 Days
A general contractor in Bay Ridge called us on a Wednesday. He'd just won a $310,000 interior build-out for a dental office in Sunset Park. Good job, good client, signed contract. The problem was the payment schedule: 10% mobilization up front, then progress draws billed at the end of each month, paid net 30 after the architect signed off. In practice that meant the first real check would land about 50 days after his crew started swinging hammers.
Between now and then he had $38,000 in framing lumber, drywall, and electrical rough-in materials to buy, and a crew of nine that needed to be paid every Friday. His bank line was maxed from the last job. He had $22,000 in the operating account and about $61,000 in receivables from two other projects that were also "net 30" and also late.
We had his last four months of bank statements by 1 PM. Our underwriter called him at 3:15 to walk through the two other jobs and the contract on the new one. We wired $65,000 the next morning. He bought his materials Thursday, made payroll Friday, and paid us down from the draws as they came in.
This post is about how that works, what it actually costs, and when a merchant cash advance is the wrong tool for a contractor.
Why contractors have the worst cash flow gap in small business
Almost every business waits to get paid. Contractors wait longer, and they front more money while they wait.
Here's the typical timeline on a mid-size commercial job:
Stage: Mobilization — When you spend: Week 0: deposits, permits, insurance certs — When you get paid: 5–10% deposit (sometimes)
Stage: Materials — When you spend: Week 1–2: lumber, drywall, fixtures, equipment rental — When you get paid: Nothing yet
Stage: Labor — When you spend: Every Friday from week 1 — When you get paid: Nothing yet
Stage: First progress draw — When you spend: — — When you get paid: Billed end of month 1, paid 30–45 days later
Stage: Retainage — When you spend: — — When you get paid: 5–10% held until final completion, often 60–90 days after
Add it up and a contractor on a $300,000 job can be $80,000 to $120,000 out of pocket before the first draw clears. If two jobs overlap, the hole is deeper. And a single late payment from a GC or property owner — which is the norm, not the exception — pushes everything back another two weeks.
Banks know this. That's why most contractor lines of credit are small relative to job size, take 3–6 weeks to open, and get frozen the moment your balance sheet shows a big receivable that's aging past 60 days.
What a merchant cash advance does for a contractor
A merchant cash advance is a purchase of a fixed amount of your future receivables at a discount. We advance you a lump sum today; you remit a fixed daily or weekly amount until the purchased amount is paid. Some people call this a revenue-based advance, because the amount you qualify for is set by your monthly deposits, not by your credit score or collateral.
For a contractor, three things make it fit the draw gap:
1. Speed. We're a direct funder. We underwrite in-house and fund from our own balance sheet, which is why the Bay Ridge GC had money in 24 hours instead of 24 days. Nobody is shopping your file around.
2. Sizing is based on deposits, not on the bank's view of your receivables. If your business has been depositing $90,000 a month for the last six months, that's what we underwrite against. Whether your receivables are 30 or 60 days old matters less to us than whether money keeps landing in the account.
3. Payments can be weekly. Most contractors get paid in lumps, not daily card swipes. A weekly remittance from your operating account fits that rhythm better than a daily pull. We'll set up either one.
What the numbers look like on a $65,000 advance
Here's the Bay Ridge deal, roughly:
Advance: $65,000
Factor rate: 1.30
Total payback: $84,500
Term: 8 months (about 34 weeks)
Weekly remittance: roughly $2,485
The cost of the money was $19,500 over eight months. That sounds like a lot until you compare it to the alternative. If he'd walked away from a $310,000 job because he couldn't front the materials, his gross profit on that job — call it 18%, or about $56,000 — was gone. Paying $19,500 to keep $56,000 is a decision most contractors make in about ten seconds.
The advance only makes sense when there's a job on the other side of it. That's the honest version. If you're using an advance to cover overhead on a slow month with nothing signed, the math gets ugly fast, and we'll tell you that when we look at your file.
What our underwriters look for on a contractor file
Contractor files are some of the most interesting ones we see, because the deposits are lumpy by nature. A restaurant deposits every day. A GC might deposit $140,000 on the 3rd and nothing until the 28th. Our underwriters know the difference, and they read the statements accordingly.
Here's what moves the decision:
Monthly deposit volume, averaged over 4–6 months. We're looking for $20,000/month minimum, and most contractor deals we fund are in the $50,000–$200,000/month range. Lumpy is fine. Trending down for three straight months is a question we'll ask about.
Time in business. Six months minimum, and 12+ makes a real difference in what we can offer. We do not fund startups or pre-revenue outfits — a contractor who just got his license and is bidding his first job is not a fit, and an advance would be the wrong product for him anyway.
Ending balances and NSFs. If the account is dipping to $400 before every draw hits, and there are five NSFs in the last 90 days, that tells us the business is already running on fumes. One or two NSFs with an explanation (a check cleared a day before the wire landed) is normal in construction. A pattern is a problem.
Signed contracts and draw schedules. This is where contractors have an edge over other industries. If you can send us the executed contract on the job you're funding, with the payment schedule, our underwriter can see exactly when the money that pays us back is going to arrive. That has turned a "no" into a "yes" more than once.
Existing advances. If you already have a position open, we evaluate the file individually — how much is left, what the payment is, and whether your deposits support another one. There's no automatic answer either way.
Owner credit. We soft-pull. A 580 score with strong deposits gets funded. A 720 with $9,000 in monthly deposits does not. Credit is a factor, not the factor.
If you're a contractor doing $20,000+/month with at least six months in business, you can get pre-qualified at 501advance.com with three months of statements. Soft pull, same-day decision, and if we're not the right fit we'll say so before you've wasted a day.
Three contractor situations we fund every week
The materials-before-mobilization gap. An electrical contractor in the Bronx lands a $180,000 school retrofit. The supply house wants $42,000 for panels and wire before they'll deliver, and the mobilization check from the district is 20 days out. We fund $50,000 on Tuesday; the panels are on-site Thursday.
The overlapping-jobs squeeze. An HVAC and plumbing shop on Long Island has three jobs going at once, all billed monthly, all paying net 30. Payroll for 14 people is about $31,000 every two weeks. Two draws slip by a couple of weeks at the same time. We fund $75,000 to bridge the gap; the draws pay it down over the next five months.
The retainage hold. A roofing contractor finishes a $420,000 job and has $42,000 in retainage locked up for 90 days pending the final punch list. He needs $30,000 to buy into the next job. We advance against his deposit history, not the retainage, and he's on the next roof the following Monday.
What all three have in common: an existing business with real deposits and a concrete reason for the money. That's the file we say yes to fast.
When an advance is the wrong call for a contractor
We'd rather tell you now than after you've signed.
You need the money for 18 months or longer. An advance is short-term working capital — 4 to 12 months is the normal range. If you're buying a $250,000 excavator you'll run for a decade, an equipment loan or lease is cheaper and built for that. Use the advance for the gap, not the asset.
Your margins are under 10%. If a job's gross profit can't comfortably absorb the cost of the advance, taking one to finish the job means working for free. Run the numbers before you call us.
You have no signed work coming. An advance against a pipeline of "probably" is how contractors get into trouble. Fund a contract, not a hope.
You're already carrying three or more positions. At that point a new advance doesn't solve the problem, and we'll usually say so. A reverse consolidation may be worth a look instead, but that's a different conversation.
How to get funded this week
Pull your last 3–4 months of business bank statements (PDFs from your online banking, not screenshots).
Send the contract or draw schedule for the job you're funding, if you have one. It's optional, but it helps.
Submit at 501advance.com or call (888) 860-6970. Soft credit pull only.
Talk to the underwriter. On most contractor files, our underwriter will call you the same day to walk through the deposits and the job. That call is where lumpy statements get explained.
Review the offer. You'll see the advance amount, factor rate, total payback, term, and the weekly or daily remittance in one email. No surprises at the signing table.
Sign and get wired. Funds typically land within 24 hours of a signed agreement.
Get your draw gap covered before Friday
Send us your last three months of business bank statements. We'll come back the same business day with a real number — advance amount, factor rate, term, and payment — for you to decide on.
Or call us directly: (888) 860-6970.
Frequently asked questions
How much can a contractor get from a merchant cash advance? Typically 70% to 120% of average monthly deposits, depending on time in business, balances, and existing obligations. A contractor depositing $90,000 a month with a clean file can usually qualify for $65,000 to $100,000. We fund from $10,000 up to $250,000.
My deposits are big and irregular. Will that hurt me? Not on its own. Our underwriters know contractors get paid in lumps. What matters is the monthly average over 4–6 months and whether the account holds a reasonable balance between draws. Send the draw schedule and the picture gets even clearer.
Can I get funded if a customer is 60 days late paying me? Usually yes, if your overall deposit history is solid. We underwrite the business, not that one receivable. A late-paying GC is exactly the kind of gap an advance is built to cover.
Do you need a lien on my equipment or the job? No. An advance is a purchase of future receivables, not a secured loan. We don't file against your trucks, your tools, or the project.
What if I already have an advance from someone else? Send the file anyway. We look at each request individually — remaining balance, current payment, and whether your deposits support more. Sometimes the answer is yes, sometimes it's "pay that one down first," and occasionally it's a consolidation. We'll tell you the same day.
Can I pay it off early when the big draw comes in? Yes. We offer prepayment discounts on most agreements. If a $120,000 draw lands in month three, you can pay off the balance and save on the remaining cost. Ask for the early-payoff terms before you sign — we put them in writing.
Do you fund contractors outside New York? Yes. We fund nationally. Most of our contractor files are in the Northeast, but a plumbing company in Charlotte or a roofer in Phoenix goes through the same underwriting and the same 24-hour timeline.
Have a job you need to fund before the draw comes in? Send us three months of statements and the contract. Direct underwriter access, decision the same business day.
Apply at 501advance.com → or call (888) 860-6970.
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