Business line of credit for contractors
Quick answer
A business line of credit is a revolving pool of money you draw from when cash is tight and repay when clients pay, paying interest only on what you use. It refills as you repay, which makes it ideal for the recurring cash-flow gaps construction runs on.
It's cheaper per dollar than factoring but needs stronger credit and steady revenue to qualify.
If factoring is the tool for a single slow invoice, a line of credit is the tool for the everyday swings.
It sits open and ready, so when payroll is due before a draw clears, you pull what you need and pay it back when the money lands. Then the line is full again for next time.
Key takeaways
- → Revolving credit — draw, repay, and draw again as cash flow swings.
- → You pay interest only on what you draw, nothing on the unused limit.
- → Cheaper per dollar than factoring, but needs stronger credit and revenue.
- → Best for recurring gaps rather than one-time expenses.
How a line of credit works
The lender approves you for a limit. You draw against it whenever you need cash, and interest accrues only on the drawn balance.
As you repay, your available credit refills. That reusability is what sets it apart from a one-time term loan, as covered in the working capital overview.
Line of credit vs factoring
A line of credit is cheaper but requires decent credit and revenue. Factoring is faster and credit-light but costs more per dollar.
Many established contractors run both — the line for routine swings, factoring for the occasional giant invoice that would blow past the line's limit.
Qualifying and cost
Expect to need decent credit, steady revenue, and some operating history. In return you pay interest only on what you use, often in the low double digits, with nothing charged on the idle portion.
That makes a line efficient when you dip in and out rather than carrying a balance. Compare it against other products on our rates page.
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eBoost Partners offers lines of credit among its construction business financing products.