Key takeaways
- The right product depends on the gap: waiting to get paid, starting a big job, or buying equipment.
- Bank and SBA loans are usually the cheapest if you qualify and can wait. Fast funding costs more.
- In California, many non-bank funding offers of $500,000 or less come with a standardized cost disclosure, including an estimated APR. Use it to compare offers.
Why California contractors run short on cash
Most contractors don't have a profit problem. They have a timing problem. You pay for labor and materials on day one and get paid weeks or months later. In California, a few rules and industry habits make that gap wider:
- Down payment limits on home improvement jobs. California caps home improvement down payments at $1,000 or 10% of the contract price, whichever is less. On a $60,000 remodel, that's $1,000 up front while you front thousands in materials.
- Progress payments that trail the work. On home improvement contracts, payments can't get ahead of the work completed, so you're always carrying part of the job.
- Insurance and GC slow-pay. Roofers waiting on carrier checks and subs on net-30 to net-60 terms carry weeks of payroll before a dollar comes in.
- Retainage. Money held back until project completion ties up profit you've already earned.
- Seasonal swings. Roofing, HVAC, landscaping, and tree service all need to staff up before peak-season revenue arrives.
Funding is a tool for bridging those gaps. Used well, it lets you take jobs you'd otherwise turn down. Used badly, it eats the margin on the jobs you already have.
Your funding options compared
As a broker, we see these products side by side every day. Here's how they typically stack up. Actual terms vary by funder and by your file.
| Product | Best for | Typical speed | What funders review | How you repay |
|---|---|---|---|---|
| Working capital / MCA | Short timing gaps and fast-moving jobs | Often 1–3 business days | Bank deposits, time in business, existing balances | A percentage of deposits or a fixed daily or weekly amount |
| Business line of credit | Recurring, unpredictable gaps | Several days to a few weeks | Revenue, credit, time in business | Interest on what you draw; the line refills as you repay |
| Equipment financing | Trucks, lifts, machinery | Several days to 2 weeks | Credit, time in business, the equipment itself | Fixed monthly payments; the equipment secures the deal |
| Invoice factoring | Commercial or GC invoices waiting 30–90 days | Often a few days once set up | Your customer's payment history and the invoice | Settled when your customer pays the invoice |
| Bank or SBA loan | Long-term growth and larger projects | Weeks to months | Credit, tax returns, financial statements, collateral | Fixed monthly payments over years |
A straight word on merchant cash advances
A merchant cash advance isn't a loan. A funder buys a share of your future receivables for a lump sum today and collects it as a percentage of your deposits or a fixed daily or weekly amount. It's usually the fastest option and the easiest to qualify for. It's also usually the most expensive, and it often comes with a UCC filing and a personal guarantee. We walk you through all of that before you sign anything.
Match the product to the gap
Three questions narrow it down fast:
- How long is the gap? Under 90 days points to working capital or factoring. A gap that keeps coming back points to a line of credit. A multi-year need points to a bank or SBA loan.
- What is the money for? Equipment belongs in equipment financing. Payroll and materials fit working capital or a line. A commercial invoice you're waiting on fits factoring.
- How fast do you need it? If the crew starts Monday, speed matters. If you can wait a month, shop banks and SBA lenders first.
Example: A roofer waiting on a $48,000 insurance payment needs to float materials for the next two jobs. The gap is short and the money is coming, so short-term working capital or a line of credit fits. A five-year loan for a 60-day gap does not.
What it really costs
Fast funding is often priced with a factor rate instead of an interest rate. The factor rate multiplies the amount you receive to get your total payback.
Illustrative example only. Your rate and terms will differ.
With many factor-rate products, that $15,000 is owed whether you repay in four months or eight, which is why the annualized cost of short-term funding can be high. Before you sign, compare the total payback, the estimated APR on your disclosure, the payment amount and frequency, any fees taken out of the funded amount, and whether paying early saves you anything.
Then run the simple test: will the job this money funds earn more than it costs? If the job clears $30,000 in profit, a $15,000 funding cost still works. If it clears $12,000, it doesn't. Our working capital guide walks through this math step by step.
California disclosure rules
California's commercial financing disclosure law, SB 1235, took effect for covered providers on December 9, 2022. It requires many non-bank providers, including merchant cash advance and factoring companies, to give you a standardized disclosure when they present a specific offer of $500,000 or less. The disclosure spells out the amount, the total cost, an estimated APR, and the payment terms, and you sign it before the deal closes.
Use it. It's the easiest way to compare two offers quoted differently, like a factor rate against an interest rate. Some deals are exempt, including offers over $500,000, financing from banks and other depository institutions, and financing secured by real estate.
Red flags to avoid
- Fees before approval. Legitimate brokers and funders don't charge you to apply.
- "Guaranteed approval." No honest provider can promise that before reviewing your file.
- Pressure to sign today before you've seen the total payback in writing.
- Stacking beyond what your deposits can carry. A second position can make sense, but only if the combined payments still leave you enough cash to run the business.
- No clear answer on cost. If someone can't tell you the total payback, walk away.
How Funding Expansion helps
We only work with licensed contractors. You fill out one application, we review your last four months of business bank statements, and we compare options from 15+ funding partners. You see the amount, total cost, and terms in writing before you sign. If a bank loan is a better fit for you, we'll say so. Not sure you're ready? Read how contractors qualify for funding.
See what your business qualifies for
About 2 minutes to start. Free, no obligation, and the initial review uses a soft credit inquiry.
Frequently asked questions
What credit score do I need for contractor business funding?
It depends on the product. Bank and SBA loans usually want strong credit. Many working capital providers weigh your monthly deposits and banking history more heavily, and some have no set minimum. Better credit generally means better terms.
How fast can a California contractor get funded?
Working capital can fund in as little as 24 to 48 hours after approval and signing. Lines of credit and equipment financing usually take several days to a few weeks. Bank and SBA loans often take weeks to months.
Do I need tax returns to get funded?
Many short-term options rely on your last four months of business bank statements instead. Bank loans, SBA loans, and larger credit lines usually require tax returns and financial statements.
Will applying hurt my credit?
Our initial review uses a soft inquiry, which doesn't affect your score. Some funding partners may run additional credit checks during underwriting.
Do you work with contractors outside California?
Yes. Funding Expansion works with licensed contractors nationwide. This guide focuses on California rules.
This guide is general information, not legal, tax, or financial advice. Funding Expansion is a commercial funding broker, not a lender. Funding is provided by third-party funding partners and is subject to qualification. Amounts, costs, and timing vary.