Subcontractors — electrical, plumbing, HVAC, drywall, painting, and specialty trades — face the same cash flow challenges as general contractors with less leverage over payment terms. invoice factoring and working capital loans are the most useful tools.
Why Subcontracting Businesses Need Specialized Financing
Subcontractors face a structural cash flow problem: the general contractor on a project pays the sub on net-30 to net-60 from invoice, sometimes longer, while the sub’s labor and material costs are incurred daily. This gap — often 45–90 days on a typical commercial project — requires working capital financing.
Invoice factoring is particularly useful for subcontractors because the GC (the paying party) is typically creditworthy — making the invoices high-quality factoring candidates. Subcontractors with poor credit can factor GC invoices at excellent terms because the factor evaluates the GC’s credit, not the sub’s.
equipment financing covers the tools, vehicles, and specialty equipment that define a subcontractor’s capability. An electrical sub with 3 service vans and a complete tools inventory can finance these assets over 3–5 years.
Loan Options for Subcontracting Businesses
| Loan Type | Best For | Typical Amount | Rate Range | Term |
|---|---|---|---|---|
| Invoice Factoring | GC invoices with 30–90 day terms | $10K–$2M | 1%–5%/30 days | Per invoice |
| Working Capital | Labor, materials, payroll gaps | $10K–$250K | 12%–45% APR | 6–24 mo |
| Equipment Financing | Vehicles, tools, specialty equipment | $10K–$500K | 7%–22% APR | 2–5 yr |
| business line of credit | Flexible revolving for project gaps | $10K–$200K | 10%–35% APR | 12–36 mo |
*SBA rates are variable. Rates shown are typical market ranges — verify with lenders before applying.
Typical Qualification Requirements
| Requirement | Typical Minimum |
|---|---|
| Time in Business | 12 months |
| Monthly Revenue | $15,000+ |
| Credit Score | 620+ |
| Licensing | State contractor license required |
Lenders evaluate revenue consistency and business health alongside credit score. Strong monthly deposits can partially offset a lower credit score at alternative lenders. Time in business of 12 months and monthly revenue of $15,000+ are the baseline thresholds for most products.
Rates for subcontracting businesses typically range from 8%–45% APR with loan amounts from $10,000–$500,000 depending on the product and your business profile.
Common Uses for Subcontracting Business Financing
- Labor payroll between GC payments: Labor payroll between GC payments
- Tools, equipment, and specialty gear: Tools, equipment, and specialty gear
- Vehicles for crew: Vehicles for crew
- Materials purchasing: Materials purchasing
- Insurance and bonding premiums: Insurance and bonding premiums
How to Apply
- Confirm you meet the qualifications: 12 months in business, $15,000+ monthly revenue, 620+ credit score for most products.
- Prepare documents: 3–6 months business bank statements, 2 years tax returns (business and personal), business license and any professional certifications.
- Apply through our partner: Submit once, receive competing offers, compare total cost and payment structure before accepting.
Frequently Asked Questions
Ready to Explore Financing?
Compare options from multiple lenders — matched to your business profile. No commitment.
Related: Invoice Factoring • Working Capital Loans • Equipment Financing
Written by the SBLT Editorial Team. Informational only — not financial or legal advice.
Advertising Disclosure: Small Business Loans Today receives compensation when you click our partner link. Rates shown are typical market ranges — verify with lenders before applying.
Related Financing Options
Each product works differently — see which fits your specific need.