YOUR LINE OF CREDIT
IS MAXED.
HERE'S WHY AND HOW TO FIX IT.
A maxed line of credit means you've used your cash buffer and are operating with no financial margin for error. The next unexpected expense, slow pay from a GC, or bad weather week hits directly against operations — no cushion. Most LOCs max out because of three compounding problems: AR that isn't collected on schedule, billing that goes out late, and overhead that's higher than the margin can support.
The LOC was supposed to be a bridge — short-term, drawn and repaid within 30–60 days. When it's been maxed for three months, it's become permanent financing for the business's operating gap. That's a signal the underlying cash system is broken, not that you need a bigger line.
THE THREE COMPOUNDING
PROBLEMS THAT DRAIN AN LOC.
Slow AR Collection
Every invoice that sits 60 days instead of 30 is another 30 days of cash gap financed by the LOC. On $5M of revenue, moving average collection from 75 days to 45 days frees $415K — which can pay off most LOCs without any new revenue.
Late or Back-Loaded Billing
Pay applications submitted on the 20th instead of the 1st delay cash by 30 days. Back-loaded SOVs push the largest draws to the end of the project. Both force the LOC to cover the gap that billing should be covering.
Overhead Running Ahead of Margin
If overhead is 22% of revenue and gross margin is 19%, the LOC is financing the 3-point gap every month. No billing or collections improvement fixes a negative margin structure — only overhead reduction or margin improvement does.
HOW TO PAY OFF
THE LOC AND KEEP IT PAID.
Aggressive AR Recovery
Call every GC with an outstanding invoice. Prioritize the largest and oldest. A single $100K draw released early pays down a significant portion of most LOCs. This is cash already earned — it just hasn't been collected.
Rebuild Billing Velocity
Front-load every active SOV. Submit every pay application on the 1st. Implement the weekly collections cadence. These changes move $150K–$300K forward in cash timing on a $5M subcontractor over the next 60 days.
Maintain a 13-Week Forecast
Once the LOC is paid down, the forecast shows when to draw and when to repay — preventing it from becoming permanent financing again. The LOC should be drawn for specific, predictable mobilization needs and repaid within 30–45 days.
Real result: A $6.7M civil contractor had a $348K LOC maxed out with overhead running at 30%. Within 30 days of implementing the billing and collections process: $309K in the bank. The $348K LOC was fully paid off within 60 days. Owner paid out $65K in bonuses. See the case study →
