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Subcontractors face a predictable cash flow gap: you pay for labor, materials, and overhead before the general contractor pays your invoice. Payment terms (net-30, net-45, or tied to the GC’s draw schedule) create weeks of float. Working capital for subcontractors between invoices bridges that gap. This guide covers financing options—lines of credit, working capital loans, invoice financing—and how to choose the right structure for your trade. General contractors managing draws have different needs; see contractor cash flow between draws for that context. Get matched with lenders who finance subcontractors.
What Is Working Capital for Subcontractors?
Working capital for subcontractors is financing that covers payroll, materials, and operating costs during the period between when you complete work and when the GC pays your invoice. Unlike general contractors who manage progress payments from owners, subcontractors invoice the GC and wait for payment. That timing creates a cash need. Working capital products—lines of credit, short-term loans, invoice financing—provide liquidity during the wait.
Why Subcontractors Need Financing Between Invoices
Subcontractors incur costs before getting paid. Labor is weekly; materials often require upfront payment or short terms. GC payment cycles are typically net-30, net-45, or tied to the owner’s draw schedule. Even with strong contracts, the lag between cost outlay and cash receipt creates a gap. Scaling to larger projects or multiple GCs increases the gap. Working capital loans and lines of credit bridge that gap so you can pay crews and suppliers on time.
Financing Options for Subcontractors
| Product | Best For | Typical Terms |
|---|---|---|
| Line of credit | Recurring gaps between invoices; draw when needed, repay when paid | Revolving; draw and repay as cash flows |
| Working capital loan | Single project or short-term spike; known gap | 3-18 months; fixed payments |
| Invoice financing | Advance on specific invoices; GC pays lender | Per-invoice; fees on amount advanced |
Many subcontractors use a line of credit as their primary tool—draw for payroll and materials when needed, repay when the GC pays. See line of credit for contractors for contractor-specific guidance (applicable to subs as well).
Line of Credit vs Working Capital Loan: Which Fits?
Line of credit: Revolving. Draw when you need cash; repay when invoices are paid. Reuse as often as needed. Best when the gap recurs (e.g., every pay cycle or every project phase). Working capital loan: Lump sum, fixed term. Best when you have a defined need—one large project, a specific materials purchase, or a known 60-90 day gap. Match the product to your pattern: recurring gaps favor a line of credit; one-off spikes favor a working capital loan.
What Lenders Look For (Subcontractor Applications)
Lenders evaluate subcontractors similarly to other contractors, with emphasis on:
- Revenue and deposits: Consistent bank deposits from GC payments.
- Contracts and backlog: Active projects and pipeline.
- Payment history: Clean payables; no NSFs or chronic overdrafts.
- Credit: 600+ FICO typical; stronger credit improves terms.
Having 2-3 months of bank statements, current contracts, and a clear use of funds speeds approval. See contractor financing mistakes to avoid common pitfalls.
How Fast Can Subcontractors Get Working Capital?
Lines of credit and working capital loans can fund in days to a few weeks depending on lender and documentation. Faster options (e.g., same-week funding) may carry higher rates. Apply when you have a clear need and documents ready—don’t wait until payroll is due.
Subcontractor vs General Contractor Cash Flow
Subcontractors invoice the GC and wait for payment. Their gap is between cost outlay and invoice payment. General contractors receive progress payments from owners and manage draw schedules, retainage, and mobilization. Their gap is between mobilization/first draw and between-draw timing. Different payment flows, same need: liquidity during the wait. See contractor cash flow between draws for GC-specific guidance.
Frequently Asked Questions
What is working capital for subcontractors?
Working capital for subcontractors is financing that bridges the gap between when you incur costs (payroll, materials, labor) and when the GC pays your invoice. It includes lines of credit, short-term working capital loans, and invoice financing.
Why do subcontractors need working capital between invoices?
Subcontractors pay for labor and materials before the GC pays. Payment terms (net-30, net-45, or tied to draw schedules) create a cash flow gap. Working capital covers that gap.
Line of credit vs working capital loan for subcontractors?
A line of credit is revolving—draw when needed, repay when paid. Best for recurring gaps. A working capital loan is a lump sum. Best for a specific project or short-term need.
How fast can subcontractors get working capital financing?
Lines of credit and working capital loans can fund in days to a few weeks depending on lender and documentation.
What credit score do subcontractors need for working capital?
Many programs look for 600+ FICO. Strong revenue, clean bank statements, and solid contracts improve approval.
Bottom Line
Working capital for subcontractors bridges the gap between cost outlay and GC payment. A line of credit suits recurring gaps; a working capital loan suits defined project needs. Apply with clean financials and a clear use of funds. Get matched with lenders who finance subcontractors.