CRISIS — DEBT RESOLUTION

GETTING OUT OF DEBT WITHOUT KILLING THE COMPANY.

QUICK ANSWER

Construction debt spirals have a standard anatomy: billing slips, collections drift, the LOC maxes covering payroll, and then the merchant cash advances arrive — daily draws that consume the revenue that was supposed to dig you out. The exit sequence that works: inventory every obligation by real cost, stop new leakage by fixing billing and collections first (that's the engine that funds everything else), kill the MCAs before anything — their effective rates run 60–200% — then restructure the survivable debt and refinance on clean books. A $3.4M civil sub eliminated four MCAs this way. A $7.1M contractor cleared two maxed LOCs and an SBA loan in 90 days. The sequence is the strategy.

DEBT IS THE SYMPTOM. THE BILLING AND COLLECTIONS ENGINE IS THE CURE — AND THE SEQUENCE OF PAYOFF DECIDES WHETHER YOU MAKE IT.

BY JOSH LUEBKER Published: June 2026 Updated: June 2026

THE SEQUENCE

FOUR STEPS OUT, IN ORDER.

STEP 01 — TRIAGE THE STACK

Every Obligation, Ranked by Real Cost

List everything: balance, payment, rate, collateral, personal guarantee, and — for MCAs — the effective APR, which the contract hides inside factor rates and daily draws. A 1.35 factor over six months is roughly 90%+ effective. Most owners have never seen their debt on one page; the page itself changes decisions. Rank by real cost and by what each creditor can do to you. That ranking is the payoff order.

STEP 02 — TURN THE CASH ENGINE BACK ON

Billing and Collections Fund the Exit

No debt plan works without new cash, and the fastest new cash is money you've already earned: unbilled work, stale receivables, unsubmitted COs, retainage past due. Rebuilt billing structures and scheduled collections produced $310K of recovered AR in 30 days at one client, $365K at another. That recovered cash — not revenue growth, not a miracle job — is what funds the payoff sequence.

STEP 03 — KILL THE MCAs FIRST

The Daily Draw Dies Before Anything Else

Merchant cash advances take their cut daily off the top, which means they starve payroll, suppliers, and every other creditor of the same dollars. Mathematically they're always the most expensive debt on the page; operationally they're a tourniquet on the company's throat. Payoff, settlement negotiation, or consolidation into term debt — whichever path, the MCAs go first, and no new ones get signed, ever. Four eliminated at one $3.4M client. The week the last daily draw stopped, the company could breathe.

STEP 04 — RESTRUCTURE AND REFINANCE ON CLEAN BOOKS

Banks Lend Into Evidence, Not Apologies

Once the engine runs and the MCAs are gone, the surviving debt gets restructured from strength: clean monthly closes, a current WIP, a 13-week forecast, and 90 days of the line behaving like a timing tool. That package converts you from a workout case to a bankable contractor. One client went from two maxed lines and an SBA loan to all three cleared in 90 days — and a $750K facility approved he couldn't have gotten before.

HOW THE SPIRAL STARTS

THE DEBT PATTERN, BY TRADE.

Civil & Sitework: The Equipment Stack

Civil debt stacks on iron — equipment notes priced for a backlog that softened, fuel and repair bills on the card, then the LOC covering the spread. The exit lever is usually equipment economics: real per-machine cost bases reveal which iron earns its note and which should be sold into a strong used market.

Concrete: The Supplier Squeeze

Concrete spirals start at the ready-mix desk — supplier balances age past 60, deliveries go COD, and COD on material-heavy work breaks the billing cycle that was supposed to fix everything. Supplier workout agreements paired with recovered AR restore terms first; terms restore the cycle.

Electrical: The Gear-Debt Loop

Electrical subs borrow to fund gear packages, then the slow-collecting jobs the gear went into can't service the borrowing. A $2.3M electrical sub broke the loop with $365K of recovered AR — debt cleared in 120 days, $89K in the bank, the $80K line resting at zero.

Every Trade: The MCA Trap

The pattern that transcends trade: a missed payroll scare, a same-day MCA approval, then a second MCA to survive the first. Daily draws consume 10–20% of deposits while the work stays profitable on paper. Nobody bids their way out of a 90% effective rate. The trap is structural, and so is the exit.

WHAT CHANGES WHEN THIS IS FIXED

OUT THE OTHER SIDE, ON THE RECORD.

4 MCAs

Eliminated at one $3.4M civil sub. Sy-Con came in with four merchant cash advances draining the account daily, 5% gross margins, and 32% overhead. The full sequence — triage, engine, MCA kill, restructure — ran over eighteen months: every MCA gone, margins rebuilt to 33% GP, overhead to 14%, on track to be completely debt-free in 2026.

90 Days

Two maxed LOCs and an SBA loan, cleared. A $7.1M civil contractor was days from signing his first MCA when the engine work started. $310K of AR recovered in 30 days, $309K in the bank by day 30, both lines and the SBA loan cleared in 90 — then $750K of new credit approved on the clean books. He never signed the MCA.

60 Days

From maxed and drowning to paid off. A $6.7M civil contractor's fully drawn $348K line wasn't funding timing — it was funding an unmeasured 30% overhead rate. Overhead cut to 17%, collections systematized, line paid to zero in 60 days. The debt was never the problem. The leak was.

Frequently Asked Questions

MCAs, always — it's not close. Their effective rates run 60–200% against a line's 8–12%, and the daily draw structure starves every other obligation of cash before you even see it. Keep the LOC current and communicate with the bank, but every recovered dollar beyond minimums attacks the MCA stack — highest factor rate or most aggressive draw first. The day the last MCA clears, your deposits become yours again, and the rest of the sequence gets dramatically easier.

It can be — if it converts toxic structure into survivable structure and the underlying leak is fixed first. Rolling MCAs into a term loan at a sane rate with weekly-to-monthly payments is usually a clear win. Consolidating without fixing billing, collections, and overhead just resets the clock on the same spiral, with your remaining collateral now pledged. The honest test: can the 13-week forecast show the consolidated payment covered by operations in every week? If the forecast can't show it, the consolidation is a delay, not a solution.

The leak stops fast; the stack takes longer. Recovered AR and rebuilt billing typically produce meaningful cash in 30–60 days — $310K in 30 days is on the record. MCA elimination runs 60 days to 18 months depending on stack size. Full debt-free status is a 12–36 month arc for most subs who enter the sequence seriously. The encouraging math: a sub doing $5M at a restored 10% net throws $500K a year at the problem. The discouraging math: the same sub at 90% MCA rates loses the race no matter how hard the crews work. Sequence beats effort.

Most contractor debt situations are fixable earlier than owners believe — the panic point usually arrives well before the insolvency point. The honest markers for getting formal restructuring counsel involved: you cannot make payroll even after the AR recovery push, secured creditors are moving on collateral, or total obligations exceed any realistic 24-month cash projection. Short of those, the sequence on this page has pulled companies back from further out than yours. Get the one-page debt inventory built this week — the decision is unmakeable without it, and usually less scary with it.

The whole sequence, hands-on: the debt inventory with real effective rates, the billing and collections rebuild that funds the exit, the MCA payoff or settlement strategy, supplier workout terms, the 13-week forecast that proves the plan weekly, and the bank package — clean closes, current WIP — that gets you refinanced on the other side. The monthly strategy meeting is where payoff sequencing gets decided with the numbers on the table. This is Executive Financial work, from $2,900/month — and it's the engagement where that fee most obviously pays for itself.