You need to enable JavaScript to run this app.
By Travis Yule — CEO & Founder, Full Send Funding
Seven rungs, and only long-dated money adds bonding capacity: a $1 million bridge adds $666,667 of working capital on 36 months and nothing on 12.
In one sentence: A contractor’s capital stack is not a price list to climb but seven rungs sized by different things — a borrowing base, a machine, a contract, cash flow, a project, a month of revenue — and only the long-dated rungs add bonding capacity, so the stack is assembled from the bottom up by what each dollar must do.
A contractor's capital stack has seven rungs — a bank line, an asset-based facility, equipment finance, mobilization or contract financing, mezzanine debt, project finance and bridge capital — and the mistake almost every contractor makes is to read it as a price list, cheapest at the top, and assume the job is to climb as high as the bank will allow. Each rung is sized by a different thing: a borrowing base, a machine, a signed contract, a multiple of cash flow, a project's own revenue, or last month's deposits. Each changes the balance sheet your surety reads in a different direction. A $12 million contractor who runs the whole business off the cheapest rung ends up with a bank line at its clean-up date, a retainage balance the bank will not lend against, and a mobilization gap on the next job that nothing on the stack was built to fill.
The finding, with a worked $12 million electrical subcontractor placed on every rung, is that the right stack is assembled from the bottom up by what each dollar has to do, not from the top down by what it costs. The bank line carries the billing cycle. Equipment finance carries the iron, because it prices off the asset and outranks the bank's blanket lien on it. The permanent retainage position is cheapest on a structure that revolves, and cheaper still not financed at all — the release levers come first — and where neither is open to the contractor, long-dated capital carries it as the fallback: mezzanine where the size justifies it, a three-year bridge where it does not, because only a long-dated shape adds to bonding capacity instead of subtracting from it. Short bridge capital carries the mobilization gap, because it is the only rung that can be sized and funded inside the window the gap exists in.
The arithmetic underneath is the bonding interaction, and it is the part of the stack with no public dataset behind it: no regulator publishes the pricing of a private bank line, an asset-based facility or a mezzanine note to a contractor of this size, and this article says so wherever a number is an assumption rather than a source. What can be sourced — the statutes that decide who gets paid first, the tax rules that decide what a machine costs, the survey that says how often a business gets what it asked for — is cited inline; everything else is stated with its basis so you can recompute it against your own balance sheet. This is information, not legal advice; the statute and the contract control, and a construction attorney in your state should read yours.
The table is the map for everything that follows. Read the second and last columns together — what sizes the rung and what it does to the number your surety uses — because that pairing, not the price, decides which rung a need belongs on.
How the rungs work in practice, stated from the funder’s side. Pricing shapes describe structure, not levels: there is no public dataset of private facility pricing to contractors of this size, and the worked example states the levels it assumes. Working-capital effects follow from the classification of the current portion of each obligation.
Two things stand out. Only the long-dated rungs add to surety-adjusted working capital when they fund — a line and an asset-based facility are current liabilities against current assets, an equipment loan subtracts its down payment and first year of principal, and only mezzanine or a bridge past twelve months brings in cash without a matching current liability. And the rungs are sized by five unrelated things: a contractor with strong receivables but thin cash flow finds the top of the stack open and the middle closed; one with a fleet but slow-paying customers finds the reverse. The stack is not a ladder. It is a set of doors, each with a different lock.
A bank line of credit is the top of the stack because it is the cheapest, and it is the cheapest because it is the most constrained. Three constraints matter.
It is sized to the smaller of two numbers. The bank sets a borrowing base — typically a percentage of receivables under ninety days, with retainage, over-ninety balances, related-party receivables and underbillings excluded — and then a policy limit, commonly a share of annual revenue or a multiple of tangible net worth. You get the lower of the two, and for most contractors the policy limit is what binds — which is why a line rarely grows as fast as the receivables securing it.
It is priced as a spread over prime, and the spread is not the cost. The rate is prime plus one to two and a half points for a well-run contractor in our experience — there is no public dataset for this — plus an unused fee, a renewal fee, and the reviewed or audited statements the bank requires as a condition of the facility. On a $1.2 million line those add up before a dollar is drawn.
It carries covenants and a clean-up. A financial covenant is a promise to keep a stated ratio or amount inside a stated limit, tested from your own statements at set dates, and breaching one is a default whether or not a payment has been missed. In our experience the construction set is a minimum tangible net worth, a maximum debt to tangible net worth, a minimum fixed-charge or debt service coverage ratio, and an annual clean-up during which the line must be at zero — thirty days is the common form. That is common practice as we see it in files, not a measured figure: no public dataset records the covenant terms of private bank lines to contractors. The clean-up is the trap: a contractor whose retainage position is permanent — and it is permanent, at annual revenue × retention rate × release lag — cannot bring a line to zero without financing the same balance somewhere else for thirty days, which is a fair description of how a bridge facility enters a stack never designed to include one. How covenants are set and tested is its own subject; the point here is that the line's price buys the bank the right to close the box.
And it takes everything. The bank's security is a blanket lien — a financing statement whose collateral description reaches all of the debtor's assets, now owned or later acquired — perfected by a UCC-1 filing, and priority among filings is decided by filing date.[7] On federal work the bank will also want an assignment of claims: the Assignment of Claims Act lets a contractor assign amounts due under a federal contract to a bank or other financing institution, with written notice filed with the contracting officer, the disbursing office and the surety on any bond.[5] Unless the contract says otherwise the assignment must cover everything due under it and run to a single financier[6] — which is why a bank line and someone else's receivables facility cannot both sit on the same federal contract.
Underneath the bank line, for smaller contractors, sits the SBA-guaranteed loan, which behaves like a term loan rather than a revolver. One note: the FICO SBSS pre-screen that used to decide 7(a) small loans was sunset by an SBA procedural notice effective January 16, 2026,[13] which moves that decision toward the same question every other rung asks — can the business service the payment.
The scale of the top rung is worth keeping in view. In the Federal Reserve's 2026 Small Business Credit Survey, 38% of employer firms applied for a loan, line of credit or merchant cash advance in the prior twelve months; of those, 42% received the full amount they sought, 36% some or most of it, and 22% none.[12] The most common reason for seeking financing was to meet operating expenses, at 56%, ahead of expansion at 46%.[12] A bank line is the right instrument for the first of those, and the one most often only partly granted.
An asset-based facility looks like a bank line and is underwritten backwards from it: the bank asks whether the company can repay and takes collateral as a backstop; the asset-based lender asks what the collateral is worth and takes the company as a backstop. Three things follow.
Advance rates are higher, and the borrowing base is the facility. The borrowing base is the collateral value a lender will advance against on a given day — eligible receivables and inventory at their advance rates, less ineligibles, concentrations and reserves — recalculated with each certificate the borrower submits, and it is what limits an asset-based line in practice, whatever the facility's headline size. Receivables are advanced at a higher rate than a bank's, and equipment is added at a share of its orderly liquidation value — what the fleet would fetch in a managed sale. There is no public dataset of advance rates; the worked example states the ones it uses.
Fewer financial covenants, more surveillance. The trade for looser ratios is a lockbox — customer payments go to an account the lender controls and sweep against the balance — plus weekly or daily borrowing base reporting and field examinations, billed to you. The monitoring cost is fixed, so it matters more at a small facility, which is why, in our experience, asset-based lending has a practical size floor above where most subcontractors sit.
Construction receivables are a difficult collateral class, and in our experience many asset-based lenders decline the industry outright — no public dataset counts lenders by industry appetite, so that is practice observed in the files we see, not a measured share. A progress billing is not an invoice for goods delivered. It can be reduced by a general contractor's back-charge, conditioned on a lien waiver, delayed by a pay-when-paid clause — the difference between pay-when-paid and pay-if-paid decides whether the receivable exists at all if the owner fails — and it carries a retainage the lender will not count. A contractor who does find an asset-based lender should expect retainage, underbillings and anything over ninety days to be ineligible, and should expect the lender to want an intercreditor agreement with the surety before closing.
Equipment finance is the rung most contractors already use and least often place correctly. It is cheaper than everything below it and most things above it because the lender's risk is answered by the machine, and its term is set by the asset's useful life rather than a cash-flow window. Equipment financing is the stated exception to our own no-collateral rule for exactly that reason. Three facts decide where it sits.
Its lien is specific, and it outranks the bank's blanket lien on the financed asset. A purchase-money security interest — the interest taken by the party whose credit paid for the collateral, in that collateral alone — has priority over an earlier conflicting security interest in the same goods if it is perfected when the debtor receives possession or within twenty days after.[8] The equipment lender files its own UCC-1 on the machine inside the window, and the bank's earlier all-assets filing ranks behind it on that machine. It is why a contractor with a bank line can finance a fleet without asking the bank to release anything, and why an equipment lender who misses the window is a junior creditor.
The tax treatment is set by statute and is the same whether you finance or pay cash. Section 179 lets a business elect to expense the cost of qualifying property in the taxable year it is placed in service rather than depreciating it,[9] and for tax years beginning in 2026 the maximum deduction is $2,560,000, reduced dollar for dollar once the cost of qualifying property placed in service in the year exceeds $4,090,000.[10] Separately, the IRS has issued guidance on the permanent 100% additional first-year depreciation deduction for eligible property acquired after January 19, 2025.[11] Neither turns on how the purchase was paid for, so the financing decision is made on cash and bonding grounds and the tax decision once, with an accountant.
Iron has a cost of capital whether or not you borrow to buy it. The Army Corps of Engineers' own equipment cost schedule prices ownership as depreciation plus a facilities capital cost of money,[15] and a contractor who pays cash for a machine has chosen to pay that cost of money out of working capital instead of a note. Whether to buy the iron or keep the cash is its own question; on the stack, the relevant fact is that a five-year note leaves most of the purchase price outside current liabilities, while a cash purchase removes all of it from working capital on the day.
This rung has no bank product and no lender category. It exists because a job starts costing money on the day of award — bonds, insurance, submittals, material deposits, the first weeks of payroll — and pays nothing until a progress billing is approved and its clock runs out.
The clocks are statutory on federal work. A federal agency's default due date is thirty days from receipt of a proper invoice.[4] A progress payment request approved as payable under a federal construction contract must be paid within fourteen days of receipt, and a prime must pay its subcontractors within seven days of receiving payment for their work.[3] Retainage on federal fixed-price construction is discretionary rather than automatic — the contracting officer may withhold up to 10% of a progress payment if progress is unsatisfactory, and is directed to release it once performance is adequate.[2] On private work in New York, to take one state, retainage on a construction contract is capped at five percent and must be released no later than thirty days after final approval.[14] The fifty-state prompt payment rules differ enough that a contractor working in three states is working under three clocks, and every clock starts only when the billing is approved — which the contractor does not control.
Put numbers on it. A subcontractor takes a $2,400,000 job over ten months with costs at 86% of contract value — $206,400 a month — and bills at the end of the first thirty days. Under the federal clocks, the general contractor is paid within fourteen days of that billing and the sub within seven days after, so under those clocks the first dollar is due on day 51 — each is a maximum period, and the arithmetic assumes each party uses all of it. By then the sub has spent $350,880 — fifty-one days of cost — and the first draw, net of 10% retainage, brings in $216,000. The mobilization gap after the first draw clears is $134,880, and it closes only as later draws overlap later costs. On a private job with a slower approval cycle it is wider; where the general contractor's own payment is late, it is open-ended.
What the rung actually consists of, in the order a contractor should try them:
What does not belong on this rung is the next job's first draw. Financing Job A's mobilization out of Job B's is the most common structure in the industry, and it fails on both jobs the first time one slips.
Mezzanine debt is subordinated debt sized as a multiple of cash flow rather than against collateral, ranking behind the senior lender and ahead of equity, priced with a cash coupon and often a deferred component or a warrant, and long-dated — five years is the common term in our experience, frequently interest-only. On the stack it does two things no other rung does.
It is sized by earnings, so it opens where the collateral rungs close. A contractor whose receivables are pledged to the bank and whose fleet is financed has nothing left for a collateral lender, and still has cash flow. The mezzanine lender lends against that, up to the total-leverage multiple the senior lender tolerates under its intercreditor agreement.
It adds to working capital in full on the day it funds. None of it is due within twelve months, so the cash arrives as a current asset with no matching current liability — the largest bonding-capacity effect on the stack, as the worked example shows.
What makes it the wrong tool for most contractors is size and price together. There is no public dataset of mezzanine pricing or minimum sizes for companies of this size; in our experience and in common practice the structure carries an all-in cost well into the teens, and mezzanine lenders write in minimum sizes above what a $12 million contractor needs and can service. A subordinated loan from an owner — which the surety treats the same way once a subordination agreement is signed — does the same balance-sheet work at a fraction of the cost, which is why the bonding article ranks subordinating shareholder debt among the free wins.
Project finance is lending against a project's own cash flow with limited or no recourse to its sponsor, sized to the project rather than any company. For a contractor it is not a source of capital. It is the other side of the pay application: the owner's construction lender, whose draw process — inspection, verification of work in place, lien waivers from every tier, the same retainage — sets the timing of your payment far more than the owner's goodwill does.
It belongs on the stack for one reason: the diligence it demands. Before signing, a contractor should know whether the project is funded, by whom, on what draw conditions, and whether the lender's title company will accept your lien waiver form. A job with a construction lender in place pays on the lender's clock — slower than a cash owner, far more predictable than an owner still raising the money. A contractor who becomes the developer — design-build-finance, a public-private partnership — climbs onto this rung as a sponsor, and at that point the balance sheet that matters is the project's, not the company's. That is a different business.
The bottom of the stack is capital sized on revenue and funded on a bank statement rather than a balance sheet — the most expensive rung on an annualized basis and the only one that can be sized and delivered inside the window most of the gaps above exist in.
Speaking for how we structure it for contractors: sizing runs from 80% to 150% of average monthly revenue, so a $12 million contractor depositing $1,000,000 a month is looking at $800,000 to $1,500,000; the overall range we fund is $5,000 to $10 million, with revolving lines of credit from $10,000 to $2 million; terms run from four months to three years; the cost of capital runs from 4.5% to 45% depending on qualifications and term length; a decision comes back within 24 business hours on three or more months of bank statements and a soft credit pull only; and funding follows within 24 hours of approval. Two structural commitments matter more on this rung than the price: we file no UCC-1 lien against the business, and our agreements contain no confession of judgment. A blanket lien from a bridge funder sits directly across the receivables the bank's borrowing base and the surety's indemnity agreement both already claim, and what a UCC-1 does to your next facility is why this rung so often breaks a stack rather than completing it.
The rung exists to do three jobs: the mobilization gap, on a term the length of the gap; the clean-up period, when the line must be at zero for thirty days and the retainage position has not moved; and the permanent retainage position, as the fallback while no revolving rung will hold it — on a term that matches the release, the three-year end of the range, for the bonding reason the next two sections make explicit, and only until a cheaper rung opens or the position is worked down.
What it should never do is carry a structural loss, replace a bank line lost for a covenant reason the business has not fixed, or sit on top of another position drawing on the same deposits. The stacking trap is this rung's failure mode, and it applies to contractors with particular force because receipts arrive in lumps and remittances do not.
Here is the whole thing with named numbers; every input is stated, and the table recomputes from them.
The company. An electrical subcontractor billing $12,000,000 a year at a 4.5% net margin — $540,000 of net income — with $350,000 of depreciation and $110,000 of interest, so EBITDA is $1,000,000. Work comes from general contractors at 10% retainage with release six months after completion, so the steady-state retainage position is $12,000,000 × 10% × (6 ÷ 12) = $600,000, which is what the balance sheet shows.
The balance sheet at year end. Current assets: cash $350,000; billed receivables under ninety days $1,900,000; receivables over ninety days $60,000; retainage receivable $600,000; underbillings $120,000; prepaid expenses $40,000 — total $3,070,000. Current liabilities: accounts payable $1,050,000; accrued payroll and taxes $230,000; overbillings $260,000; bank line drawn $400,000; current portion of equipment notes $210,000 — total $2,150,000. Book working capital is $920,000. Fixed assets are a fleet with a net book value of $1,400,000, financed by $570,000 of long-term equipment notes beyond the current portion. Total debt is $1,180,000, or 1.18× EBITDA.
What the surety counts. The surety excludes the over-ninety receivables ($60,000), discounts the retainage receivable by 30% ($180,000), discounts the underbillings by half ($60,000) and excludes the prepaids ($40,000) — $340,000 of adjustments, leaving surety-adjusted working capital of $580,000, 37% below book. At the ten-times single-job and twenty-times aggregate rules of thumb, that is $5,800,000 of single-job capacity and $11,600,000 of program — for a company that bills $12,000,000 a year. This contractor is bonding-constrained, not demand-constrained, and every rung below has to be read against that fact.
Assumptions for pricing. Prime is held at 7.50% throughout — the arithmetic holds at any other prime — and the spreads are what we see in files rather than anything published. The bank line is priced at prime plus 1.75%; the asset-based facility at prime plus 3.25% plus $18,000 a year of monitoring; the equipment note at 8.5% fixed over sixty months; mezzanine at 14% all-in; and the bridge at an assumed 15% annualized for this file, inside our published range.
Now each rung, in turn.
Rung 1 — the bank line. Borrowing base: 75% of the $1,900,000 of eligible receivables is $1,425,000. Policy cap: 10% of revenue, $1,200,000. The line is set at the lower, $1,200,000; fully drawn it costs $111,000 a year at 9.25%. Working capital effect on the day: zero. The line already carries $400,000 and must go to zero for thirty days a year, against a $600,000 retainage position that never does.
Rung 2 — the asset-based facility. Receivables at 85%: $1,615,000. Equipment at 50% of an orderly liquidation value assumed at 60% of net book value — $840,000 — adds $420,000. Availability $2,035,000; fully drawn, $218,763 of interest at 10.75% plus $18,000 of monitoring is $236,763 a year. Working capital effect: zero. Nearly double the bank's availability at more than double the cost, with a lockbox — and only if an asset-based lender will take construction receivables at all.
Rung 3 — equipment. The company needs a $450,000 excavator. Financed at 90% over sixty months at 8.5%, the payment is $8,309 a month; in the first year $31,821 of that is interest and $67,890 is principal. Working capital falls by the $45,000 down payment plus the $67,890 of first-year principal that sits in current liabilities — $112,890, or $1,128,900 of single-job capacity at ten times. Paying cash would remove $450,000 from working capital and $4,500,000 of capacity. Same machine, four times the bonding cost.
Rung 4 — mobilization. The $2,400,000 job above opens a $350,880 hole before the first draw and a $134,880 gap after it. Nothing on rungs 1 to 3 was sized to see it: the line is sized to last quarter's receivables, and the job has not produced one yet.
Rung 5 — mezzanine. To a total-leverage ceiling of 2.5× EBITDA — the senior lender’s assumed tolerance for this file; no public dataset sets it — the company could add $1,320,000 of subordinated debt — $2,500,000 less the $1,180,000 already outstanding. At 14% that is $184,800 a year, 34% of net income. Working capital effect on the day: plus $1,320,000, because none of it is current — plus $13,200,000 of single-job capacity. The largest bonding effect on the stack, at a price and minimum size that make it the wrong tool for this company unless it is buying a competitor.
Rung 7 — the bridge. Sized at 80% to 150% of monthly revenue, $800,000 to $1,500,000. Take $1,000,000 at the assumed 15%: $150,000 in the first year. On a twelve-month term the working capital effect on the day is zero, the entire balance being current. On a thirty-six-month term, only a third is current: working capital rises by $666,667 and single-job capacity by $6,666,667. Same money, same first-year cost, and one shape buys the company two thirds of the bonding room the mezzanine note would have, at a fraction of its minimum size.
Inputs: revenue $12,000,000; EBITDA $1,000,000; existing debt $1,180,000; eligible receivables under 90 days $1,900,000; fleet net book value $1,400,000; prime assumed at 7.50%. Bank line: lower of 75% of eligible receivables ($1,425,000) and 10% of revenue ($1,200,000), at prime + 1.75% = 9.25%. Asset-based: 85% of eligible receivables ($1,615,000) plus 50% of an orderly liquidation value taken at 60% of net book value ($420,000), at prime + 3.25% = 10.75% plus $18,000 of monitoring. Equipment: $450,000 machine, 90% financed over 60 months at 8.5% fixed — first-year interest $31,821, first-year principal $67,890, plus a $45,000 down payment. Mezzanine: 2.5 × EBITDA less existing debt, at 14%. Bridge: $1,000,000 at an assumed 15% annualized inside the published range; on a 36-month term one third of the balance is current. Capacity effect = working-capital change × 10. Pricing levels are assumptions, not sourced figures.
What the company should actually do, read off the table: keep the line for the billing cycle; finance the excavator rather than pay for it; fund the mobilization gap on the short end of the bridge rung, one contract at a time; and take the $600,000 retainage position in the honest order. A standing balance is cheapest on a structure that revolves, and cheaper still not financed at all — the retainage levers that shorten the release lag or lower the rate shrink the position itself, at no interest, and they come first. Here both revolving rungs are closed to the position: the bank excludes retainage from the borrowing base and requires a thirty-day clean-up the position cannot satisfy, and an asset-based lender that will take construction receivables at all will not count retainage either. That leaves the thirty-six-month bridge as the fallback, and on this table it is the only rung that adds capacity without a mezzanine minimum. Carried there, surety-adjusted working capital goes from $580,000 to roughly $1,130,000 — $580,000 less $112,890 for the excavator plus $666,667 from the bridge — and single-job capacity from $5,800,000 to roughly $11,300,000. The company can now bid the work its backlog says it should. It should carry the position on a term facility only until a cheaper rung opens or the position is worked down: the same $600,000 on a revolving line, were one available to hold it, costs less at the rates assumed here.
The fact underneath that sequence deserves a figure of its own, because it is the one contractors most often learn after signing. Raise $1,000,000 on each rung and ask what happens to single-job bonding capacity at ten times.
A line or asset-based draw is neutral, an equipment note is negative by ten times its first year of principal, and long-dated money is positive in proportion to how much of it sits outside twelve months.
$1,000,000 raised on each structure, with capacity at ten times surety-adjusted working capital. A line or asset-based draw adds equal cash and current liability. The equipment note is 100% financed over 60 months at 8.5% fixed, so the first-year principal of $167,629 is a current liability against a machine that is not a current asset. The bridge counts as current only the share of the balance due within twelve months: all of it at 12 months, half at 24, one third at 36. The mezzanine note is interest-only for five years, so none of it is current.
The line and the asset-based facility do nothing on the day, because the cash and the liability are both current. The equipment note is negative, because its first year of principal is a current liability against a machine that is not a current asset. Every long-dated rung is positive in proportion to how much of it sits outside twelve months — half of a twenty-four-month bridge, two thirds of a thirty-six-month one, all of an interest-only mezzanine note. Why the term of a facility matters more to a bonded contractor than its rate is the same arithmetic run the other way, and the two articles are meant to be read together.
Every rung above the bridge takes a security interest in something, and the surety has a claim on the same things without filing anything. Understanding the contest lets a contractor assemble the stack without one rung disqualifying another.
The bank and the equipment lender divide by rule. First to file wins on the same collateral,[7] except that a purchase-money interest perfected within twenty days of delivery takes the financed goods ahead of the earlier blanket filing.[8] The bank and the asset-based lender cannot coexist on the same receivables — a second filing on the same accounts is simply junior[7] — and on a federal contract the single-financier rule settles it before priority arises.[6] One of them holds the receivables; the other is not on the stack.
The surety is different in kind. Its presence is not optional on public work — a federal construction contract above the statute’s $100,000 threshold must carry both a performance bond and a payment bond under the Miller Act,[1] and most states impose the equivalent on their own projects — and it has no filing, because it does not need one. The contractor's indemnity agreement assigns contract funds and contract rights to the surety on default, and on a bonded job the surety's position in the contract balance — including the retainage — is the thing every lender's counsel will ask about before closing. On federal work the surety is a named recipient of the assignment-of-claims notice,[5] which tells you how the statute sees the relationship. In practice the bank and the surety negotiate an intercreditor agreement or a carve-out of bonded contract proceeds, and a contractor who says it is bonded on the first call rather than at closing saves weeks. The precise priority between a surety's rights in contract funds and a lender's lien is a question of state and federal case law for a construction attorney; what a contractor needs to know is that the question exists and is asked.
The bridge funder, if it files, sits across all of it. A revenue-based funder with a blanket UCC-1 is the junior creditor on every asset and a problem for every senior one: the bank's borrowing base certificate asks whether anyone else has filed on the receivables, and the surety's renewal questionnaire asks the same. The absence of a filing is the first question to ask on this rung.
For a contractor assembling or repairing a stack, in the order that costs least:
There are situations in which no rung is the answer, and naming them is part of the discipline.
Seven rungs, each sized by a different thing and each moving surety-adjusted working capital in a different direction. The bank line is cheapest and tightest, with a clean-up a permanent retainage position cannot satisfy. Asset-based lending advances more against the same collateral for a lockbox, and often declines construction. Equipment finance prices off the asset and takes the machine ahead of the bank's blanket lien if it files inside twenty days. Mobilization financing fills a gap — $134,880 after the first draw on a $2.4 million job under the federal clocks — no balance-sheet rung has seen. Mezzanine adds to working capital in full and costs a third of net income at the size a $12 million contractor could carry. Project finance is the owner's rung and your diligence question. Bridge capital, sized on revenue, is the only rung that can fill the mobilization gap and the clean-up, and it is the fallback for the retainage position when no revolving rung will hold it — provided it files no lien, and the retainage tranche is on a term long enough to add capacity rather than merely cash.
For the $12 million contractor, a line for the billing cycle, a note for the excavator and — with both revolving rungs closed to retainage — a thirty-six-month bridge carrying the retainage position as the fallback takes surety-adjusted working capital from $580,000 to about $1,130,000 and single-job capacity from $5.8 million to about $11.3 million. Free capacity first, then the rung sized for each need, then term before rate on anything that funds the permanent position — and a term facility on that position only until a cheaper rung opens or the position is worked down.
If you want to walk a specific balance sheet through the stack — which rung a gap belongs on, and what each structure would do to your capacity before you sign — call 518-312-0382 or check what you would qualify for. It takes about a minute and uses a soft credit pull only. We fund construction working capital from $5,000 to $10 million on terms from four months to three years, and the three-year end of that range exists for the reason this article exists.
The worked contractor is a stated construction, not a client: revenue $12,000,000, net margin 4.5%, EBITDA $1,000,000, and the balance sheet, surety adjustments, advance rates, policy cap, orderly liquidation value, prime rate and spreads are all assumptions listed in the prose and in the table’s source note so that every published figure can be recomputed. Pricing for private bank lines, asset-based facilities and mezzanine notes to contractors of this size has no public dataset, and the article says so where each level appears; the same is true of the statements of market practice — the construction covenant set and the annual clean-up, mezzanine minimum sizes and all-in cost, the senior lender’s leverage tolerance, and the share of asset-based lenders that decline construction receivables — which are the firm’s experience and common practice, labelled as such where each appears rather than sourced; the bridge rate used for the example is an assumed 15% inside the firm’s published range. Bonding capacity is taken at ten times surety-adjusted working capital for a single job and twenty times for the aggregate program, the rules of thumb used across this library, and the working-capital effect of each structure follows from classifying the portion of each obligation due within twelve months as a current liability.
The statutory clocks in the mobilization example, the retainage and bonding requirements on federal work, the lien-priority rules, the Section 179 limits for 2026, the bonus-depreciation guidance and the Small Business Credit Survey figures are quoted from the cited primary documents and were reused from the library’s verified source set; the survey is a nationwide convenience sample of employer firms with fewer than 500 employees, offered as scale rather than as a comparison with any funder’s own approval rate. The priority contest between a surety’s rights in contract funds and a lender’s lien is deliberately described as practice rather than sourced, because it turns on state and federal case law that a construction attorney should apply to the contracts in hand.
The ordered set of financing a contractor can use, from a bank line at the top through asset-based lending, equipment finance, mobilization or contract financing, mezzanine debt and project finance to bridge capital at the bottom. Each rung is sized by a different thing and changes the balance sheet the surety reads in a different direction, which is why the rungs are complements rather than substitutes.
Only long-dated money. Because sureties size capacity off working capital and the current portion of debt is a current liability, a line or asset-based draw is neutral on the day, an equipment note reduces working capital by its down payment and first year of principal, and mezzanine debt or a bridge facility on a term past twelve months adds working capital by the share of the balance not due within the year.
Because retainage is excluded from most borrowing bases and because the line must usually go to zero for thirty days a year, while a contractor’s retainage position is permanent — annual revenue times retention rate times release lag. A $12 million contractor on 10% retainage with a six-month release lag carries $600,000 of it continuously, and the line was never sized to hold it.
Through a purchase-money security interest. Under UCC §9-324, a perfected purchase-money interest in goods other than inventory has priority over an earlier conflicting security interest in the same goods if it is perfected when the debtor takes possession or within twenty days after. The equipment lender files on the machine inside that window and the bank’s earlier all-assets filing ranks behind it on that machine.
Capital that fills the gap between award and the first progress payment clearing. It comes in three forms, in order of cost: a mobilization pay item in the bid schedule, supplier terms on front-loaded material, and a short facility sized against the signed contract and repaid from the first draws. On a $2,400,000 ten-month job under the federal payment clocks the gap is $350,880 before the first draw and $134,880 after it.
Almost always below a few million dollars of need. It adds to working capital in full because none of it is current, which is the largest bonding effect on the stack, but in common practice — no public dataset measures it — it carries an all-in cost well into the teens and minimum sizes above what most contractors under $20 million can use. A subordinated owner loan does the same balance-sheet work once a subordination agreement is signed, at a fraction of the cost.
Two filings can exist, but the second is junior, and the bank’s borrowing base certificate and the surety’s renewal questionnaire both ask whether anyone else has filed. On a federal contract the Assignment of Claims Act requires the assignment to run to a single financier. A bridge facility that files no UCC-1 avoids the conflict entirely, which is why we made that a structural commitment.
Travis Yule founded Full Send Funding in 2021 and leads it from Middle Grove, New York. He writes about working capital from the underwriting side of the table — what the numbers actually have to say before a business gets funded.