Construction contractors operate in a unique world where obtaining financing isn’t as easy as simply filling out an online application. Banks may discount contractors’ financials during the underwriting process, and this may make it difficult to obtain a line of credit or another type of working capital loan. So how can GCs position themselves to obtain credit? Astute contractors will take care to identify when to obtain financing, how much to secure, and which red flags the bank will be looking for.

When Should Contractors Get a Credit Line?
Circumstances vary from company to company, but there is one constant; even the most successful GCs should have a line of credit. It is never too soon to secure a line of credit, even if there is no present or anticipated future use for financing. A need for capital will inevitably arise at some point in the future and reducing the delay in accessing that capital is good for business. Think of a line of credit like a rainy-day fund – those who prepare for the storm can hold off for the inevitable break in the clouds a little longer.

Why Should Contractors Get a Line of Credit?
A line of credit can serve a GC in a number of ways, including forward funding for accounts receivable, company growth, client prequalification, and available equity to invest in new projects. Take the pandemic for example. GCs with lines of credit are positioned to weather the storm while the economy slows. GCs with existing lines of credit have established a relationship with their banks, and that relationship can help move their request to increase the line of credit or Paycheck Protection Program (PPP) application closer to the top of the pile. A line of credit can mean the difference between timely paying subcontractors and suppliers so a jobsite doesn’t grind to a halt.