Monday, June 9, 2025
The Smart Contractor's Guide to Working Capital in 2025
The Real Cost of Slow Pay
The construction industry in 2025 is navigating intense financial pressure — from persistent payment delays to rising costs and shrinking margins. Traditional financing alone can’t keep pace with the complex cash flow demands of modern projects.
Subcontractors regularly face 60+ day wait times on pay apps, while daily expenses like labor, materials, and overhead continue. It's the industry's cash flow paradox — and solving it means rethinking how you manage working capital.
Understanding the Capital Stack: What Contractors Actually Use
Your working capital stack is the mix of tools that keeps operations running before payments land. Here's the typical breakdown:
- Cash: Retained earnings. Flexible, but finite.
- Supplier Terms: Negotiated credit. Limited based on volume and relationship.
- Bank Lines of Credit (LOCs): Support payroll and overhead, but include clean-up periods and restrictive covenants.
- Credit Cards: Easy to obtain. Poor fit for major expenses.
Yet even this stack often leaves a gap...
The "Gap" No One Talks About
Let’s say you’re a $30M subcontractor:
- $1M in supplier terms
- $1.5M LOC
- $3M retained profit
That’s $5.5M in working capital. But in a 60-day delay window, you need $6.75M just to stay operational.
What happens when a GC pays in 90+ days? When you win multiple large bids at once?
This is when reactive borrowing kicks in — and usually, it's too late.
Core Financial Pressures in 2025
- 100% of construction firms report delayed payments from clients.
- Subcontractors wait an average of 56 days to get paid — while GCs think it’s 30.
- 43% lack sufficient working capital to handle unexpected expenses.
- 91% of firms are struggling to hire, contributing to wage inflation.
- Material price spikes and contract rigidity compound risk.
Why Traditional Financing Falls Short
Even successful contractors get declined. Why?
- Construction is seen as high-risk
- Banks require collateral — but labor and pipeline don’t count
- LOCs are subject to abrupt limit changes
- SBA loans now require more documentation and fees
Innovative Financing Tools That Fill the Gaps
1. Invoice Factoring
- Turn invoices into immediate cash. You get paid now; the factoring company collects later.
- Learn more
2. Material Financing
3. Equipment Financing
- Lease or finance to preserve liquidity.
4. Purchase Order Financing
- Get supplier costs paid upfront so you can fulfill large orders without draining cash (how it works).
5. Supply Chain Finance
- Extend your payment terms while suppliers get paid sooner. Explore
How SCG Funding Completes the Stack
SCG Funding helps contractors unlock capital when the banks can’t.
We provide:
We move fast, structure around your project cash flow, and get you funded — often within 24–48 hours.
We help when:
- Payroll’s due but pay apps are delayed
- You need upfront cash for new jobs
- Traditional LOCs or supplier terms are tapped
“We’re not replacing your bank — we’re completing your capital stack.”
Real Example: Bridging the Gap to Keep Momentum
Scenario: A $5M subcontractor lands a commercial build requiring $400K in upfront costs — materials, labor, permits — with payment scheduled net 60. Confident in their plan, they allocate reserves and tap a small LOC to float initial expenses.
At day 45: The pay app is still pending. Cash is tight. Meanwhile, a second job — worth $600K in revenue — gets approved. Without immediate liquidity, they risk delaying payroll, pushing suppliers, or walking away from new business.
The fix: SCG Funding steps in with a $250K working capital bridge loan, custom-structured to match the contractor’s project timeline. Funds are deployed within 48 hours, covering labor and material needs across both jobs.
The result: No delays. No supplier strain. No missed opportunity. SCG’s capital gave them breathing room to execute with confidence — and grow without compromise.
Strategic Capital Best Practices
-
Secure Financing Before You’re Desperate
- Clean books = better terms. Plan early.
-
Match Capital Type to Expense
Expense Type Best Fit Materials Supplier / Billd Payroll LOC / WC Loan Equipment Equipment Financing Emergencies Flexible Credit Line -
Diversify Your Stack
- Don’t rely on one source of capital. Build optionality.
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Use Tech for Financial Visibility
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Negotiate Smarter Contracts
- Push for faster progress payments and lower retainage to improve cash timing.
Final Thoughts: Build a Resilient Financial Foundation
Smart contractors treat capital like a job site tool — you use the right one for the task.
With rising costs, labor shortages, and payment delays, working capital is more than a buffer — it’s a weapon.
If you want to:
- Take on larger jobs
- Win more bids without stressing liquidity
- Turn growth into actual profit
...then your capital strategy matters.
Let’s talk. SCG Funding is here to bridge the gap between ambition and execution. Download our free 2025 Small Business Loan Playbook to learn how to fund smarter, avoid common pitfalls, and scale with clarity and control.
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