Key takeaways
- Working capital is short-term funding sized to your monthly deposits. It's built for timing gaps, not long-term growth.
- The cost is often quoted as a factor rate. Always convert it to a total payback and compare it with the profit on the job.
- It works best when the money is already coming: a signed contract, an approved insurance claim, or a GC invoice.
What working capital is
In the funding world, "working capital" usually means short-term business funding for day-to-day costs: payroll, materials, fuel, subs, and equipment rentals. For most contractors, it comes as either a short-term loan or a merchant cash advance, and it's sized to what flows through your business bank account each month.
It's built for speed. Instead of tax returns and a business plan, most working capital providers look at your recent bank statements, your time in business, and any funding you already have.
When contractors use it
- Floating materials on a job that pays on completion
- Making payroll while a GC invoice sits at net-45 or net-60
- Covering the gap on an approved insurance claim that hasn't paid out yet
- Staffing up before peak season, like roofing after storms or HVAC before summer
- Taking a bigger commercial job than your cash reserves would normally allow
- Handling a surprise, like a truck repair that would otherwise sideline a crew
California's home improvement rules make this gap common. Down payments are capped at $1,000 or 10% of the contract price, whichever is less, and progress payments can't run ahead of the work. On residential jobs, you almost always carry the cost for a while.
How much you can get
Working capital amounts are tied to your average monthly deposits. First fundings are often sized somewhere between a fraction of one month's revenue and a little more than a full month, depending on your balances, time in business, and existing obligations. Through our funding partners, offers range from $10,000 to $2,000,000.
| What funders look at | Why it matters |
|---|---|
| Average monthly deposits | Sets the size of the offer |
| Time in business | Most of our partners look for 6+ months |
| Daily balances and negative days | Shows whether you can carry a payment |
| NSF and overdraft fees | A pattern can lower or block an offer |
| Existing funding | Current advances or loans reduce what's available |
| Credit | For many partners, affects pricing more than approval |
How repayment works
Most working capital is repaid in one of three ways:
- A percentage of your deposits. Payments rise and fall with your revenue.
- A fixed daily or weekly debit. Predictable, but it doesn't slow down when business does.
- A fixed monthly payment on some short-term loans.
Always ask which one you're getting. A fixed daily payment during your slow season hits very differently than a percentage of deposits.
Run the numbers on a job
This is the test we walk every contractor through. Say you win a $120,000 commercial reroof. Labor and materials cost $85,000, the GC pays net-60, and you need $50,000 now to start.
Illustrative example only. Your rate and terms will differ.
The job still makes $20,000, and without the funding you couldn't have taken it. That's a good use of working capital.
Now change one number. If that same job only cleared $14,000 before funding, the same $15,000 cost turns it into a $1,000 loss. Same product, completely different decision. Do this math before you sign, every time.
Working capital vs. a line of credit
| Working capital | Business line of credit | |
|---|---|---|
| Best for | One-time gaps and specific jobs | Recurring, unpredictable gaps |
| Speed | Often 1–3 business days | Several days to a few weeks |
| Qualifying | Deposits and bank history weigh heavily | Credit and financials usually matter more |
| Cost | Usually a fixed cost set up front | Interest on what you draw |
| Flexibility | One lump sum | Draw and repay as needed |
If you need cash regularly and can qualify, a line of credit is often the cheaper long-term tool. Working capital wins when speed matters or a line isn't available to you yet. See the full comparison in our business funding guide.
When not to use it
- To cover ongoing losses with no job or revenue to repay it
- When the funding cost is bigger than the job's profit
- To pay off another advance without a clear plan, which can start a cycle that's hard to break
- When you qualify for a bank loan or line and can wait a few weeks
If any of these fit, tell us. We'd rather give you a straight answer than a bad deal.
Find out what you qualify for
About 2 minutes to start. Free, no obligation, and the initial review uses a soft credit inquiry. You'll see the full cost in writing before you sign.
Frequently asked questions
Is working capital a loan?
Sometimes. Some working capital is a short-term loan. A merchant cash advance is not a loan; it's a purchase of future receivables. Your offer paperwork will say which one it is.
How fast can I get working capital?
Often within 24 to 48 hours after approval and signing, once your bank statements and ID are in.
Can I pay it off early and save money?
It depends on the agreement. With many factor-rate products, the full payback is owed no matter when you pay, though some funders offer early payoff discounts. Ask before you sign.
Can I get more funding later?
Many funding partners review renewals once a meaningful share of the balance is paid down and your deposits have stayed steady. It isn't automatic.
Can I qualify with credit below 600?
Often, yes. Many working capital partners focus more on deposits than credit, but expect higher costs with lower scores.
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.