Cash Flow Gaps Hit Construction Companies Especially Hard: How You Can Be Prepared
If you own a construction business, making sure you have sufficient working capital is probably one of your biggest challenges.
With every project and payment timeline looking different, it’s tough to count on steady, predictable cash inflows.
But, that’s just the beginning.
After a project is secured, you’re expected to cover the costs of labor, materials, and equipment. And, since payments often depend on hitting major milestones—or finishing the entire job—you can easily go weeks to months without seeing any cash come in.
That delay between spending and getting paid is where many good contractors get stuck. Too often, it can result in:
- Walking away from new work
- Stretching your cash reserves too thin
- Getting behind on bills and payments
In these situations, staying competitive means finding reliable sources of working capital. Short-term funding can be a lifeline, helping you cover critical costs and keep projects on track until payments come through.
How to Stay Ahead of Cash Flow Crunches
Too many businesses wait until they’re in a capital crunch to look for financing. By then, your options can be limited—and you’re in a panic instead of a position of control. By being proactive, and knowing where you can turn to for funding, you can avoid getting into a cash crunch.
Here are three ways construction businesses keep themselves ready:
1. Know where your cash flow breaks down
Look at your past projects. When did expenses hit hardest? Which clients paid late? What surprised you? Understanding your payment cycles helps you anticipate the next gap and avoid repeating it.
2. Plan for upfront costs
Before a job starts, estimate what you’ll need to spend in the first 30, 60, and 90 days. That includes payroll, materials, permits, rentals—everything. Build that number into your cash flow plan so you're not scrambling mid-project.
3. Secure access to working capital early
Don’t wait until you’re short on cash to start evaluating your options. Every day that goes by, the pressure builds. Knowing where you can access fast, flexible capital, lets you stay in control—whether that’s being able to jump on new opportunities or cover ongoing expenses.
Short-term Funding is Built for How Construction Works
When there’s not enough cash on hand to cover your needs, many contractors look to short-term financing because it’s faster, more flexible, and easier to qualify for than traditional loans.
This kind of alternative funding helps you keep the wheels turning so you can cover payroll, buy materials, replace equipment—whatever you deem necessary.
Used strategically, short-term capital can help you:
- Take on more jobs and have the cash to cover upfront costs
- Stay current on Accounts Payable even when Accounts Receivable are delayed
- Protect your cash reserves and maintain a liquidity cushion
Funding Isn’t Just an Amount—It’s About When You Get It
Though it’s important to get the amount of cash you need, it’s equally important to get it when you need it. Too late and a new project opportunity has vanished, members of your crew have quit, or your equipment is beyond repair. So the question becomes: who do you get your short-term funding from?
Contractors in particular need financing partners who move at your pace. The right funding partner will be upfront, fast, and flexible—and offer terms that work with your business, not against it. That means approvals within hours, funding within days, no surprise fees, and a process that doesn’t bog you down with lots of paperwork.
Want a deeper look at construction financing and how you can be prepared? Download our free ebook, Bridging the Cash Flow Gap: Making Short-term Capital Work for Your Construction Business, for insights on:
- Why maintaining healthy working capital is key for contractors
- How to make short-term financing work for you
- How to pick the right funding solution based on your needs
Since 2008, Fora Financial has distributed $4 billion to 55,000 businesses. Click here or call (877) 419-3568 for more information on how Fora Financial's working capital solutions can help your business thrive.
