Construction financial management can sometimes see unique situations, and have to adapt quickly. A contractor has to deal with a myriad of matters, including equipment costs, payroll, materials, permits and licensing, insurance, and more. To streamline the process, what you need to know is how to plan your growth with a construction business line of credit. You need answers to questions like ‘how can I apply for a line of credit for a construction business?

Construction Business Line of Credit
Construction Business Line of Credit

Construction Business Line of Credit

A construction line of credit is a financial instrument that allows your business to maintain operations by having extra cash on hand to: cover invoices on time, manage payroll and make purchases that allow you to keep projects alive. A line of credit allows for business growth, letting entrepreneurs operate with peace of mind.

A Line of Credit Can Grow Your Business

A line of credit gives you power. It benefits the construction business in many ways. Here are a few.

More Freedom

Financing like this is invaluable for managing costs and building growth. You enjoy greater flexibility as the business will have access to funds for paying bills or taking on new opportunities. You can expand the business, your creditworthiness, and your reputation.

Working Capital

Construction costs can be overwhelming. Through lines of credit, you always have cash on hand to manage your projects and expenses. This can be beneficial during slow sales cycles.

Getting Equipment

Not having what you need is a deterrent to being ready. A line of credit lets you rent or purchase as needed. Use it for skid steers, excavators, and other equipment that lets your team perform safely, timely, and effectively.

Hire On-demand

Your equipment is useless without licensed and trustworthy contractors. Your projects rise or fall on the talent you can afford. Lines of credit make it easier to hire extra contractors as needed or to invest in ones with greater experience and training.

Plan Your Growth

Business growth is about anticipating core construction business metrics, steps, and decisions in an effort to make things happen. These understandings have to align with your vision of the business’s future. It’s not only about explaining your intentions to clients, investors, and lenders but about what you expect.

Your financial future has to be part of the vision. You can retool an original financial plan, taking expansion into account. Break plans down by time periods with ideas of how each new year (or five year) period will end. Plans should answer these questions (and more, based on your anticipations):

  • Where do I need to expand?
  • What equipment do we need?
  • Do we need to grow staff?
  • What resources will improve production?
  • What should my cash flow look like?
  • Will financing be needed? How much?

Financial Projections

Financial projections can be based on where you want to build on sales forecasts and anticipated expenses. For instance, if you have tight cash flows, project and manage closer projection periods. Include a profit and loss statement and balance sheets.

Along with a sound history, well-prepared projections encourage credit lenders to work with you. Talk with financing partners. Work with current entities or, after you’ve built a reliable credit history, reach out to ones who offer greater opportunities. Even if you go in as a risk, knowing how to qualify for a construction loan with bad credit can improve your odds.

Efficiency, growth, and getting optimal lines of credit will require a detailed overview of operational needs. You have to know your construction business’s potential volume of output, individual employee output, costs of supply chain stages, and how a line of credit can balance things.

Lenders like the idea of tightly controlled expenses. Your operations plan will determine if a lender can trust your judgment with their money. Hopefully, your past with credit lenders will streamline the process. If you’re new, conduct your due diligence. Once you’ve entered into a contract, it may be difficult to change.

Requirements for Getting a Construction Credit Line

For a construction credit line, you’ll have a better cash flow, especially during slow periods. You’ll also have the funds to manage expenses, improve the adaptability of your processes, and build your business credit.

A lender may ask you to have some personal history in the construction industry to validate your trustworthiness. You’ll also need good personal credit. You don’t exactly need strong business financials, even if you’re working with a lender that already knows you. They have to see that you can repay on time. Lenders will want repayment sources. This is usually proof of payments expected from customers and clients.

At the minimum, lenders may need no less than six months in business and no less than monthly revenue of $15,000 to consider you. Lenders may not bring up a credit score needed for a construction loan, but a good score of 600 or higher wouldn’t hurt.

Lastly, online lenders have leaner qualifications. But these entities are definitely more likely to have lower credit limits and higher interest rates.

The Other Side of The Coin

You may be wondering, what are disadvantages of holding a line of credit?

  • Depending on the lender and terms, fees and charges can add up. Pay-as-you-go isn’t ideal, even at low-interest rates. Compare annual fees, dig out additional costs, determine which financial product works best for you.
  • Cash-on-hand can be easily mismanaged. A credit line should be an insurance policy when cash is short, not a go-to. Anyone can abuse funds and, unable to repay balances, you run the potential of ruining your business and reputation.
  • Lines of credit may come in low borrowing amounts. This means they may not be able to provide exactly what you need at any given time.


Your construction business will always need plans for cash flow generation. It’s the only way to derive maximum profits and project product and service availability. With the construction business plan, you’ll be able to manage all stages of your supply chains in affordable, practical ways and, most importantly, grow your construction business. To learn more about a Construction Line of credit, apply with ROK financial to speak with a Business Financing Advisor today.

About the Author, Madison Taylor

Madison Taylor is the Brand Ambassador at ROK Financial. She is responsible for raising brand awareness and business relationships with business owners across the country. Madison loves that she plays a small role in getting Business Back To Business Through Simple Business Financing and looks forward to hearing what you think about the blogs she creates! Madison has been working in the financial space for six years, and loves it! When she is not at work, you will find her at home learning a new recipe to test out on her family or going on new adventures with her friends.