Larkpine Lending Group, an Iowa City, IA small-business funding service, explains funding for contractors and builders: lines of credit and working capital for materials and crews between draws, equipment financing for trucks and machines, and how retainage affects cash flow. Johnson County construction figures come from Census County Business Patterns 2023.
| Construction employer sites, Johnson County, IA, CBP 2023 | 379 |
|---|---|
| Under five employees | 68.1% |
| Residential builders (NAICS 2361) | 93 |
| Construction firms without payroll (2024) | 903 |
| Structures to compare | Credit lines and equipment loans |
What people mean by a contractor's loan
No one product is the contractor's loan. The phrase usually means one of three things: a line of credit drawn to buy materials and meet payroll between progress payments, an equipment loan for a truck or machine, or a working capital loan for a specific gap such as the start of a large job. Construction business loans are the same structures other businesses use, read against a contractor's job-by-job cash flow.
Owners who build or remodel property for resale are asking a different question; property and construction-to-permanent lending is outside the structures on this site.
How retainage works in a construction contract, and why it hurts cash
Retainage is a share of each progress payment that the project owner or general contractor holds back until the work is finished and accepted. On a long job, it can add up to a meaningful sum that you have already earned but cannot spend. Subcontractors feel it twice: the general contractor's retainage may be passed down.
Retainage terms are set by contract; confirm the terms for each job. Your attorney can tell you what applies to a given job; partners simply want to know how much is held, on which jobs, and when you expect it released.
Construction company working capital: covering the gap between draws
A typical cycle: you buy materials and pay a crew for three or four weeks, submit a pay application, wait for approval and payment, and then repeat. A line of credit fits this pattern because you draw for each cycle and repay when the draw arrives. A one-time working capital loan suits a single large job with a known payment schedule.
Illustrative arithmetic (not an offer)
A remodeling contractor takes a $180,000 job paid in four draws, with 5% retainage held on each. Materials and labor for the first phase cost $50,000 before the first draw of $45,000 arrives, less $2,250 retained. The contractor is $7,250 behind after phase one, before overhead, and the retained amounts accumulate to $9,000 by the last draw. That is the shape of the gap a line is sized to.
Construction equipment financing
Trucks, trailers, skid steers, mini excavators, compressors and lifts are usually financed on their own, secured by the item. That keeps the line of credit available for materials and payroll. Partners look at the machine's age and hours for used equipment; the equipment financing page explains loans versus leases.
How to improve cash flow in a construction business: five habits
- Bill promptly at each milestone; late pay applications mean late draws.
- Track retainage by job and chase its release at closeout.
- Negotiate deposits or mobilization payments on larger jobs.
- Keep equipment payments separate from operating credit.
- Price change orders before doing the work.
A business line of credit covers the gaps that remain; a working capital loan covers one known shortfall.
Contractors in Johnson County, IA by the numbers
| Trade (NAICS 2017) | Establishments | Under 5 employees |
|---|---|---|
| All construction (23) | 379 | 68.1% |
| Residential building (2361) | 93 | 81.7% |
| Building finishing contractors (2383) | 64 | 89.1% |
| Plumbing, heating and AC (238220) | 42 | 54.8% |
| Electrical (238210) | 38 | 44.7% |
| Nonresidential building (2362) | 18 | 38.9% |
| Roofing (238160) | 15 | 73.3% |
Source: U.S. Census Bureau, County Business Patterns 2023. Separately, Nonemployer Statistics 2024 counted 903 construction businesses with no paid employees in the county, including 287 residential builders (NAICS 2022 code 2361). The county also authorized 1,241 new housing units by building permit in 2025, 714 in 2024 and 1,236 in 2023 (Census Building Permits Survey).
Construction also led the employer lists of several nearby town ZIPs, including Solon's and Kalona's; see the Iowa City, IA page for county context.
What a partner reads in a contractor's file
- Revenue history and how lumpy it is from month to month
- A work-in-progress or backlog list with contract values
- Receivables aging and retainage held
- Equipment payments and lines already open
- Licenses and insurance certificates partners may ask to see
Specialty trades and related pages
Landscaping and lawn care companies share many contractor cash-flow patterns; see the landscaping funding page. All other business types are on the industries overview.
Bonding, insurance certificates and what they signal
Some general contractors and public projects may ask subcontractors to carry specific insurance and sometimes bonds; confirm what each job asks for. Partners reviewing a contractor's request may ask for certificates because an uninsured loss on a job can wipe out the receivables that were supposed to repay the line. Keep current certificates ready; if you are bonded, the surety relationship can show a partner that someone else has also reviewed your finances.
Whether a given job needs a bond, and what kind, is a contract and legal question; we only note that partners ask.
By Larkpine Lending Group · Updated