A LINE OF CREDIT IS A TOOL. MOST SUBCONTRACTORS USE IT LIKE A LIFELINE.
A revolving line of credit is designed to bridge cash flow timing shortfalls, like funding payroll while you wait on a pay app or covering a material deposit before the draw comes in. It's not designed to cover structural cash flow problems. Most subcontractors who keep drawing on the line without paying it back are using it to fund a billing lag problem, an overhead rate problem, or an AR problem. Banks approve lines of credit for subcontractors who can demonstrate clean WIP, a current ratio inside SPM's 1.3 to 2.0 band, and a 13 week cash flow forecast. For the outside reference on the ratio itself, CFMA's 2023 surety prequalification guidance publishes a minimum standard of 1.15 to 1.20 and a construction industry mean of 1.7. SPM fixes the underlying problem so the line becomes a tool instead of a dependency.
The test is whether the balance ever rests at zero. A $500K line that touches zero every quarter is doing its job. A $200K line that hasn't been below its own ceiling in two years is a tourniquet, and the bank reads it the same way you should. When a balance only climbs, the line is covering a billing lag, an overhead rate nobody recalculated, or AR sitting in the 60 day bucket. Fix the cause and the line goes back to being a tool you use twice a year.
WHAT IT MEANS.
A revolving line of credit is a bank facility a subcontractor draws on to bridge a specific cash timing shortfall and repays when the matching receivable comes in.
What the line is for changes by trade. Civil draws fund mobilization: moving machines, fuel, and first month labor on jobs that won't pay for 60 days, so the healthy cycle is draw at mobilization, repay at first collection, and rest at zero in between. A concrete sub sees pour month spikes, where three stacked pours mean ready mix invoices due net 30 while the pay app collects in 60, so the line gets sized to the biggest realistic pour month and drawn against mapped receivables. Electrical is the gear package: a $180K gear buy four months before it bills, paired to its receivable and shrunk with deposits and stored material billing so the line carries less of the float.
Public work is its own case. DOT and municipal subs carry the longest earned but unpaid float in the industry, which makes their line structural rather than occasional. That raises the stakes on the sizing math and on the bank relationship, and it makes clean books the difference between a $250K facility and a $750K one.
WHY THE LINE NEVER RESTS.
The balance creeps up with no repayment event
The line goes up $20K a month with no specific repayment event, just less cash coming in than going out on a consistent basis. That's structural, and a line of credit will only postpone it. Billing lag means invoices are going out 22 days late, overhead is running at 26 percent when it was bid at 10 percent, and AR is sitting in the 60 plus day buckets, and drawing more on the line doesn't touch any of those three.
There's no WIP schedule the bank can trust
A WIP schedule shows the bank where every active project stands: contract value, billings to date, costs to date, estimated cost to complete, and projected profit. A bank underwriting a construction line wants one that closes cleanly, with no material overbillings that suggest pulled forward revenue, no large underbillings that suggest uncollected work, and consistent gross margins across projects. Most subcontractors who get turned down for a line don't have one at all.
The current ratio is under 1.3x because AP is doing the financing
The current ratio is current assets divided by current liabilities, and a 1.3x ratio means for every dollar of short term obligation the business has $1.30 in liquid assets to cover it. SPM holds clients in a band of 1.3 to 2.0, from the CONTROL Book. CFMA's 2023 surety prequalification guidance publishes the outside reference points on the same ratio: a minimum standard of 1.15 to 1.20, a construction industry mean of 1.7, and a ratio closer to 1.50 reading as strong rather than merely acceptable. Most subcontractors below the band got there by accumulating AP, with vendor invoices aging past 30 days because cash was tight, which makes the line and the AP aging the same problem wearing two different coats.
Nobody can produce a 13 week forecast on short notice
A bank wants to see that the owner understands what's coming in and going out over the next 90 days. A 13 week rolling cash flow forecast shows the bank that the line will be used as a bridge rather than as ongoing funding. Most subcontractors can't produce one when the request comes, and that's usually the moment the conversation turns into a decline.
WHAT IT LOOKS LIKE IN DOLLARS.
You have a pay app submitted for $320K and it's 18 days out from receipt. Payroll is due in 5 days and the current balance doesn't cover it. Draw $80K on the line, make payroll, and pay it back in 20 days when the pay app clears.
Size it to your worst realistic timing shortfall and not to your comfort: roughly one month of fully burdened operating costs plus your largest typical mobilization. For most $3M to $8M subs that works out between 8 percent and 15 percent of annual revenue. A $5M sub usually wants $400K to $750K of capacity.
A verified civil client at $6.7M came in with a $348K line maxed out. The line wasn't funding timing, it was funding a 30 percent overhead rate nobody had measured. Overhead was cut to 17 percent, collections were systematized, and the $348K line was paid off in 60 days with $309K in the bank at day 30.
Another civil contractor cleared two maxed lines and an SBA loan in 90 days, then got approved for $750K in new credit he couldn't touch before. A $2.3M electrical sub now carries an $80K line at zero balance with $89K in the bank. Same businesses in both cases, with a fixed system underneath them.
FIX THE STRUCTURAL PROBLEM FIRST.
Every SPM engagement that involves line of credit issues starts with the diagnostic: what's the underlying cause of the dependency? Most of the time it's billing lag, which gets closed, an overhead rate, which gets recalculated, or AR over 60 days, which gets collected. The bank conversation comes after that work rather than before it.
A clean reconciled WIP schedule, the current ratio calculation, the 13 week rolling cash flow forecast, and a backlog report get produced every month for every client. When the bank asks, the package is already there and it's current. Banks fund evidence rather than pitches, and one client went from unbankable to a $750K approval on that package alone.
The 13 week forecast maps weekly payroll against projected receipts, so weeks where receipts don't cover payroll are known draw weeks. The draw becomes a decision made on Monday with a repayment date attached to a specific receivable. That's the whole difference between a tool and a lifeline.
THE OUTPUTS, NAMED.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
FREQUENTLY ASKED.
