Swiftstead Commercial Capital, a small-business funding broker in St. Cloud, Minnesota, explains how contractors fund payroll on a new contract. Specialty trade employers in Stearns County paid about $203.9 million in wages in 2023 (Census CBP). Working capital, a credit line or, at a higher cost, an advance can cover the mobilization gap.
Crews paid weekly, contracts paid later
Specialty trade contractors in Stearns County paid about $203.9 million in wages to 2,347 employees in 2023, and building contractors about $79.6 million to 1,028 (U.S. Census Bureau, County Business Patterns 2023). Those wages go out every week or two. Contract payments follow a pay application, review and processing cycle that can run well beyond a month from the first day on site.
The mobilization gap, week by week
- Week 1: crew, equipment and materials mobilize. Wages and purchases start.
- Weeks 2 to 4: work continues; costs accumulate.
- End of the first billing period: the pay application goes in.
- Review and approval: the owner or general contractor checks the work.
- Payment: the check arrives, less any retainage.
Count the weeks from step 1 to step 5 and multiply by the weekly cost. That is the gap to fund. Retainage, held until completion, adds to it.
What a WIP schedule tells a partner
A work-in-progress (WIP) schedule lists each job with its contract value, costs to date, billings to date and estimated cost to complete. It shows whether you are billing ahead of or behind your costs. Larger contractors keep one routinely; smaller ones may not, but even a simple version helps a partner see that the gap is temporary and tied to a real contract.
Three tools for the gap
| Working capital | Line of credit | Merchant cash advance | |
|---|---|---|---|
| How it works | Lump sum, fixed installments | Draw and repay as jobs pay | Funder buys future receipts |
| A loan? | Yes | Yes | No |
| Fits | One large contract | Overlapping jobs | Card-heavy firms that accept the cost |
| Watch for | Installments starting before the first payment | Renewal and limit reviews | Daily collections and total cost |
Working capital suits a single large job with a clear payment date. A line of credit suits a contractor running several jobs at different stages. A merchant cash advance is not a loan, and its collections begin straight away, before the first contract payment arrives, which works against the very gap it is meant to fill. Its cost is also usually higher.
Construction around Central Minnesota
Construction was the largest sector by employer count in several ZIP codes around St. Cloud in 2023: 81 establishments in ZIP 56379 (Sauk Rapids area), 51 in ZIP 56374 (St. Joseph area), 37 in ZIP 55320 (Clearwater area) and 30 in ZIP 55319 (Clear Lake area) (ZIP Code Business Patterns 2023). Most of those firms had fewer than five employees, so a single new contract can double their payroll for a stretch.
A worked calendar, without the dollars
Hypothetical: a four-person crew starts a job on a Monday. Payroll runs weekly. The contract bills monthly, the general contractor approves applications within two weeks of submission and pays two weeks after approval, holding back retainage. The first pay application goes in at the end of week four, approval comes in week six and payment in week eight. The crew is paid eight times before the first check arrives, and that check is short by the retainage.
Swap in your own crew size, pay schedule and contract terms. The count of paydays before the first payment is the number that sizes the gap.
Before you sign the contract
- Read the payment terms: billing period, approval time and retainage.
- Check whether the general contractor pays only when the owner pays.
- Map the weeks to first payment and size the gap.
- Line up funding before mobilizing, not after the first missed payday.
Contractor and construction financing covers equipment and credit lines in more depth. Further Central Minnesota notes are collected on the blog.
By Swiftstead Commercial Capital ยท Updated