How contractors fund payroll between draws
How Contractors Fund Payroll Between Draws
If you run a contracting business, you already know the rhythm: work gets done, invoices go out, and then you wait. Whether it's a construction draw schedule, a municipal payment cycle, or a commercial client that pays net 60, the cash doesn't land on the same week your crew needs to get paid. That gap between finishing the work and getting paid for it is one of the most common cash flow problems in the trades, and it has nothing to do with whether your business is healthy.
Here's the basic tension. Payroll is fixed and it doesn't wait. Your framers, electricians, and laborers need to be paid on schedule regardless of where you are in a draw cycle. But draws are tied to milestones: foundation poured, rough-in complete, inspection passed. Even on a well-run project, there can be two or three weeks between when labor is used and when the draw that covers it actually arrives.
A Few Ways Contractors Bridge the Gap
Line of credit. A revolving line through a bank gives you a pool of cash to pull from and repay as draws come in. It's a solid tool if you can get approved, though banks tend to look hard at time in business, collateral, and personal credit before extending one.
Invoice factoring. Some contractors sell their unpaid invoices to a factoring company for a portion of the value up front, then get the remainder (minus a fee) once the client pays. This works well if your receivables are with reliable payers, since the factoring company is essentially betting on your customer's credit, not just yours.
Cash reserves. The old-fashioned way: keep a buffer built up from past jobs specifically so payroll never touches the tightest week of a draw cycle. This is the cheapest option by far, but it requires discipline and a track record of profitable jobs to build the cushion in the first place.
Merchant cash advance. This is where a funder provides a lump sum of capital based on your business's revenue history, and repayment is structured around your incoming receivables rather than a fixed monthly loan payment. For a contractor, that can mean the repayment flexes a bit with slower and busier stretches, instead of a rigid due date that doesn't care what week your draw actually clears.
None of these is automatically "best." A GC juggling five projects with staggered draws has different needs than a two-truck electrical outfit waiting on one slow-paying property manager. The right tool depends on how predictable your draws are, how strong your existing banking relationships are, and how fast you need the cash in hand.
A Simple Way to Think About It
Say a contractor has a $40,000 payroll due Friday, but the draw tied to that stage of the job isn't scheduled to arrive until the following week. That's not a business problem, it's a timing problem. The work is done, the value is real, the client is going to pay. What's missing is the bridge between "the job earned this" and "the money arrived." Whatever tool a contractor uses to cross that gap should be judged on how well it matches the shape of that timing problem, not just on how fast it can be arranged.
Where Clover Advance Fits
Clover Advance is a direct funder of merchant cash advances, meaning we fund deals with our own capital rather than brokering your file out to other lenders. We work with contractors who need capital to move as fast as the job does, without waiting on a draw schedule to catch up with payroll. Every business's situation is different, and nothing is approved or priced until we actually look at your numbers, so we won't throw out figures here that don't mean anything until then.
If payroll timing between draws has been a recurring squeeze on your jobs, it's worth talking through your specific situation. Reach out through our contact form and we'll take a look.