A new contractor funds payroll before the first draw by planning the gap between weekly wages and slower pay applications, then covering it with savings, a credit line or a short working capital loan. Slatebend Business Capital, a small-business funding broker in Cleveland, Tennessee, explains the options and the records lending partners review.
The building backdrop in Bradley County, Tennessee
Bradley County issued permits for 621 new housing units in 2023, 768 in 2024 and 788 in 2025 (U.S. Census Bureau, Building Permits Survey). The county had 171 construction employer establishments in 2023, 113 of them specialty trade contractors, and 60.8 percent of construction employers had fewer than five employees (U.S. Census Bureau, County Business Patterns 2023). A further 1,323 construction businesses had no payroll in 2024 (Nonemployer Statistics 2024), a separate survey. A firm that hires its first employee moves from the second count into the first.
Why the gap exists
Wages are due every week or two. Payment for the work comes later: a pay application is submitted, reviewed and paid, and some contracts hold back a share as retainage until the job is done. Materials may also be bought before the first payment arrives. A new firm with no cash cushion feels the whole gap at once.
Lay it out on paper before asking anyone for money: each payroll date and amount for the first job, each expected payment date and amount, and the running balance in between. The deepest dip in that running balance is what needs funding.
Option 1: a line of credit
A business line of credit suits a gap that repeats on every job. Draw for payroll, repay when the pay application clears, and draw again on the next job. Only the drawn amount accrues interest. A brand-new firm may find lines harder to obtain, because partners like to see a few months of deposits first.
Option 2: a short working capital loan
A working capital loan gives one lump sum for one known gap and is repaid in fixed installments. It suits a single large job more than a steady flow of smaller ones. Check the payment frequency: a weekly debit that starts before the first pay application clears adds to the problem it was meant to solve.
Option 3, with care: a merchant cash advance
Advance offers reach contractors too, especially those with card or steady bank deposits. A merchant cash advance is not a loan; it is collected as a share of future receipts until an agreed total is reached. Lumpy contract payments and daily collections are an awkward match, so total the amount it would collect before considering it.
What partners will ask a new contractor
- Business bank statements, even if only a few months.
- The contract or job, the pay application schedule and any retainage terms.
- The owner's credit history.
- The entity record with the Tennessee Secretary of State.
- Existing equipment loans and other debts.
A practical order of operations
- Set up the business entity and a business bank account before hiring.
- Build the payroll-versus-payment timeline for the first job.
- Use savings for the first gap if you can, and keep records of it.
- Apply for a credit line once a few months of deposits exist.
- Keep equipment purchases on their own financing, so the line stays free for payroll.
Other trade-firm needs are covered under funding by sector, and more posts are on the Slatebend blog.
By Slatebend Business Capital · Updated
