WORKING CAPITAL REQUIREMENTSHOW MUCH WORKING CAPITALCONSTRUCTION CASH NEEDSSUBCONTRACTOR BALANCE SHEETLOC SIZINGWORKING CAPITAL REQUIREMENTSHOW MUCH WORKING CAPITALCONSTRUCTION CASH NEEDSSUBCONTRACTOR BALANCE SHEETLOC SIZING
WORKING CAPITAL · CONTENT · LAYER 2 DIFFERENTIATION
HOW MUCH WORKING CAPITAL DOES A SUBCONTRACTOR ACTUALLY NEED?
QUICK ANSWER
A commercial subcontractor needs roughly 10–20% of annual revenue in accessible working capital — available cash plus undrawn LOC. The exact number depends on trade (electrical contractors with heavy material buyout need more than labor-only trades), pay cycle mix (municipal work requires more than private GC work), and growth rate. At $5M revenue, that's $500K–$1M in accessible capital as a baseline. Growing fast or taking on large public work pushes it higher.
Working capital is the fuel that lets you execute backlog. Not profit. Not revenue. Accessible cash and credit — the difference between current assets and current liabilities that you can actually deploy in the next 90 days. Most subcontractors don't know their working capital position. They know their bank balance. Those are two very different numbers.
BY JOSH LUEBKERUPDATED MAY 2026WORKING CAPITAL & GROWTH
WHAT WORKING CAPITAL ACTUALLY MEANS
CURRENT ASSETS MINUS CURRENT LIABILITIES. THAT'S IT.
Working capital = current assets minus current liabilities. Current assets are what you can convert to cash in 90 days or less: cash, accounts receivable, and underbilled job costs. Current liabilities are what you owe in the same window: AP, current portion of debt, overbillings, payroll accruals.
A contractor with $800,000 in receivables, $150,000 cash, and $600,000 in AP plus current debt has $350,000 in working capital — regardless of what the bank account shows on any given day. That $350,000 is what's actually available to fund the next mobilization, make payroll on a new job, or absorb a GC payment delay without hitting the LOC.
The current ratio: Banks evaluate working capital through the current ratio — current assets divided by current liabilities. A current ratio above 1.2 is generally acceptable. Above 1.5 is strong. Below 1.0 means current liabilities exceed current assets — the business is technically working capital insolvent even if it has a positive bank balance.
WORKING CAPITAL BENCHMARKS BY REVENUE
WHAT YOU NEED AT EACH REVENUE LEVEL.
Figures represent total accessible working capital needed — available cash plus undrawn LOC. Based on private GC pay cycles (30–45 days). Municipal/DOT work adds 20–40% to these figures.
UNDER $2M REVENUE
Min Working Capital
$150K
Target
$250K
Current Ratio Target
1.3+
At this level, 2–3 simultaneous jobs. Working capital primarily covers payroll float and material deposits. LOC of $100K–$150K is typically sufficient if receivables turn in 35–40 days.
$2M–$4M REVENUE
Min Working Capital
$300K
Target
$500K
Current Ratio Target
1.3+
3–5 simultaneous jobs. Supervision layer starts building cost. Material trades (electrical, underground utility) at the high end. Labor-only trades (framing, drywall) at the low end. LOC of $200K–$350K with cash floor of $100K+.
$4M–$7M REVENUE
Min Working Capital
$500K
Target
$850K
Current Ratio Target
1.4+
5–8 simultaneous jobs. Retainage exposure grows. Equipment-heavy trades (civil, grading) need additional capital for fleet carrying costs. The $650K cash floor from the CFOS benchmark applies at the midpoint of this band.
$7M–$12M REVENUE
Min Working Capital
$800K
Target
$1.4M
Current Ratio Target
1.5+
8–15 simultaneous jobs. Bonding requirements become significant — surety wants $1.2M+ working capital for $7M aggregate capacity. Retainage on active jobs can be $400K–$700K frozen. LOC needs to be sized to the actual peak deficit, not a rule-of-thumb number.
TRADE-SPECIFIC ADJUSTMENTS
NOT ALL TRADES NEED THE SAME CAPITAL.
Working capital requirements vary significantly by trade because pay cycle timing, material intensity, and mobilization cost profiles are fundamentally different.
Electrical: Add 30–40% to baseline — switchgear deposits, conduit buyout, and T&M float create the highest working capital requirement per dollar of revenue of any commercial sub trade
Civil/Earthwork: Add 20–30% — equipment-heavy with day-one mobilization costs and 45–90 day private GC pay cycles
Underground Utility: Add 25–35% for municipal work — pipe procurement at award, 60–90 day municipal pay cycles
Concrete/Masonry: Add 10–20% — formwork and rebar front-load before billing, scaffold costs hit before milestones
Framing/Drywall: Baseline — labor-dominant, shorter cycles, lower material intensity
SWPPP/Erosion: Seasonal adjustment — wet season capital need spikes 40–60% above dry season baseline
WHAT BANKS ACTUALLY LOOK AT
THE THREE RATIOS THAT DETERMINE YOUR CREDIT.
01
Current Ratio
Current assets ÷ current liabilities. Below 1.0 = working capital insolvent. 1.2–1.5 = acceptable. Above 1.5 = strong. This is the first number a bank or surety looks at. Track it monthly.
02
Debt-to-Equity
Total debt ÷ owner's equity. Below 2.0 is generally acceptable for a growing sub. Above 3.0 signals over-leverage. MCAs and equipment debt both count. Know your number before the bank asks.
03
Working Capital Available
Cash + undrawn LOC + receivables due in 30 days. This is what's actually deployable right now. CFOS tracks it monthly on the CEO Report so you always know your real deployable capital position.
COMMON QUESTIONS
FREQUENTLY ASKED.
A $5M commercial subcontractor on private GC work typically needs $600K–$900K in accessible working capital — available cash plus undrawn LOC. For electrical contractors with heavy material buyout, add 30–40% ($780K–$1.26M). For contractors doing significant municipal or DOT work with 60–90 day pay cycles, add 20–35%. The CFOS target for a $5M sub is a $650K cash floor plus $1.2M total working capital available for growth — which requires a combination of retained earnings and a properly sized LOC.
Working capital is a balance sheet position — current assets minus current liabilities. A line of credit is one component of accessible working capital (the undrawn portion counts as available capital). The LOC is a tool for managing working capital timing gaps. A business with $400K in working capital and a $300K LOC ($200K drawn) has $500K in accessible capital. A business with $400K in working capital and a fully drawn LOC has $400K — no buffer for anything unexpected.
CFOS tracks current ratio, debt-to-equity, and working capital available as core CEO Report metrics — updated monthly. The 13-week cash flow forecast models when receivables land and when obligations hit, so working capital gaps are visible before they become crises. LOC is sized against the actual peak cash deficit from the forecast — not a rule of thumb. Bonding readiness is evaluated against working capital position quarterly so surprises don't happen at surety renewal.
Core Financial starts at $1,900/month. Executive Financial — which includes the monthly CEO Report, working capital tracking, 13-week cash flow, and CFO advisory — starts at $2,900/month. Fully operational in 60 days.
JOSH LUEBKER
President · The Construction CFO · Sulphur Prairie Management
Former PM and master electrician. SPM has helped contractors go from working capital insolvent to $750K available in 90 days — including one who had two maxed LOCs and an SBA loan when we started. Working capital is buildable. The system is what gets you there.
