Industries
Working Capital for Commercial General Contractors
How monthly pay applications, owner and architect review, 30–60+ day payment and retainage shape a commercial GC's float — and how to size capital to it.
The short answer
Commercial general contractors often fund the float between weekly costs — subcontractor payments, self-performed payroll, general conditions — and monthly pay applications with short-term working capital sized to the deepest point of that float and repaid as approved applications pay. Owners commonly pay 30 to 60 or more days after submission, once architect review clears, and hold retainage until substantial completion.
Key takeaways
- A commercial GC sits in the middle of the payment chain: costs go out weekly, and money comes in once a month — after review, certification, and the owner's payment terms.
- The schedule of values is a cash plan: how general conditions, mobilization and stored materials bill decides how deep the float runs.
- You hold retainage from subs as the owner holds it from you, but on self-performed work and general conditions there is nobody to pass the hold down to.
- A GC's deposits are largely other people's money passing through to subs; showing what stays with you makes the file read accurately.
- Capital bridges an approved pay application. It does not fix a job bought below cost or a change order still under negotiation.
A commercial general contractor is the one party on the job that pays almost everybody before anybody pays it. Subcontractors bill monthly and expect to be paid when you are — or sooner, if they hold the critical path. Your superintendent, project manager, and self-perform crews are on weekly payroll. The trailer, temporary power, insurance, and the bond were paid at mobilization. And the owner pays once a month, after a review cycle you do not control.
That float — what you have paid out against what has come in — is the defining cash problem of the commercial GC, and it grows with every job you win. The clause that pushes the wait down to subs and the money held back from every draw each have their own pages: how pay-when-paid clauses move the gap and the math of retainage. This page is about the GC's side of the ledger: how the monthly cycle runs, where it stretches, and how to size capital to it.
The pay application is a monthly cycle with a weekly cost base
Commercial work bills against a schedule of values: the contract broken into line items — general conditions, sitework, concrete, steel, each trade's scope — each with a scheduled dollar value. Every month you submit an application for payment, typically a summary sheet plus a continuation sheet in the familiar AIA G702/G703 style, showing work completed this period, materials stored, retainage withheld, and what has already been paid. Behind it sit your subs' own applications and the lien waivers the owner will want before releasing money.
Then it waits. Many projects run a pencil draft past the architect or owner's representative first; the formal application is then certified; and on a financed project the owner's lender sends its own inspector before it funds. Payment terms commonly run 30 days from approval, and 45 to 60 days or more from submission is common in practice. Every week of that, next month's work is already being built — on your account.
| Step in the cycle | Typical timing | What the GC is carrying meanwhile |
|---|---|---|
| Work in place for the billing period | Through the month | Self-perform payroll weekly, sub progress, materials, general conditions |
| Sub applications and lien waivers collected; pencil draft reviewed | Often the last week of the month | The next period's work, already underway |
| Application certified by the architect or owner's representative | Commonly one to two weeks after submission | Another round of payroll and supplier bills |
| Owner's lender inspects and funds, on financed projects | Adds days to weeks | Subs asking when they will be paid |
| Payment received, less retainage | Often 30 days after approval; 45–60+ days after submission is common | The float peaks just before this check lands |
| Retainage released | Commonly at substantial completion, with final release after closeout documents | Often 5–10% of the contract, held for months after the last trade leaves |
The GC floats the subs, the payroll, and the general conditions
Pay-when-paid language exists to push the wait down the chain, but in practice a GC rarely gets to hide behind it. The mechanical sub on the critical path cannot be left unpaid for 75 days without the schedule paying for it, and the trades you want on your next bid remember who paid on time. Self-performed work — concrete, carpentry, the superintendent's whole crew — never had a pay-when-paid clause at all. General conditions run every month regardless of how much work the application captures.
Run the shape on hypothetical numbers. Say a GC is billing about $400,000 a month on a tenant build-out, with subs accounting for $300,000 of each month's work and self-performed labor plus general conditions another $70,000. If the GC pays its own crews weekly and its key subs about 30 days after their applications, while the owner pays the GC about 55 days after submission, then at the deepest point of each cycle the GC has paid out most of a month's job cost that the owner's check has not yet covered — on a job that is on budget and on schedule. Win a second job like it and the float roughly doubles.
Build the schedule of values like a cash plan
The float is not fixed. How you write the schedule of values and run the billing changes how deep it goes, and every lever here is cheaper than borrowed money.
- Give general conditions and mobilization their own line items, so the costs you incur at the start bill at the start instead of being spread thin across the job.
- Bill stored materials where the contract allows it — long-lead equipment delivered to site or to an insured off-site facility, with the documentation the owner requires — instead of waiting for installation.
- Run the pencil draft early. A clean draft agreed with the architect a few days before the deadline is often the difference between being paid this month and next.
- Ask about the retainage reduction. Some contracts step retainage down once the job passes a completion milestone; it rarely happens unless someone asks.
- Price the float into the bid. If an owner's terms mean carrying two months of cost, that carry is a job cost like any other.
Public work runs on rules of its own. On federal construction contracts, the standard prompt-payment clause makes progress payments due 14 days after the designated billing office receives a proper payment request, and requires each subcontract to oblige the prime to pay for satisfactory work within 7 days of receiving payment for it. Private commercial work has no single clock: the contract, and in many states a prompt-payment statute, sets it — and the owner's review cycle decides how close reality comes to the paper.
Working capital bridges approved applications, not losses or disputes
A bridge assumes an approved application on the far bank. Be honest about which gap you are actually in.
- If the job was bought — bid below cost to win it — capital scales the loss. The fix lives in estimating and in the next contract's terms.
- If the money is held up by an unsigned change order or a disputed scope, you are being asked to finance a negotiation. Get the change approved, or protect your claim, before you fund the work.
- If the owner has stopped paying everyone, you do not have a timing gap; you have a collection problem. That calls for a construction attorney and your lien and payment rights, not an advance.
- If one job's draw is quietly covering another job's shortfall, borrowed money only hides the hole for another month — and subs and sureties notice when it surfaces.
- If you already carry an advance, do not take a second one to make its payments. Pay a position down first, then take another look.
And if a surety backs your work, talk to them before you add any short-term obligation, because it shows up on the balance sheet they read. Capital that carries a profitable float is a different story from capital that papers over losses — our piece on how working capital shapes bonding capacity walks through how sureties look at it.
A GC's statement is mostly other people's money — show what stays
Underwriting starts with deposits: their level, how consistent they are over time, how long the business has been running, and how much of that cash flow is already committed to other financing. A GC's statements have a quirk. A large share of every deposit belongs to someone else, passing through to subs within weeks. An underwriter who reads construction files knows that, and you make it easier by showing it. Two lines — which deposits were pay applications on which jobs, and the sub payouts that followed — turn a statement full of large in-and-out swings into what it is: a billing cycle. The full sequence is laid out in how a funding decision actually gets made.
- 1
Map the float by job
For each active job: the last application submitted, its approval status, the expected payment date, and the subs you will pay before it lands. The deepest week across all jobs is your number.
- 2
State retainage receivable and payable
What owners hold from you, what you hold from subs, and the realistic release windows. The difference is earned money your statements cannot show.
- 3
Size to the gap and plan the payoff
Fund the deepest point of the float, not the contract value, and plan to clear it as the approved applications pay. Right-sized beats bigger. If you are paid in lumps, read how any funding agreement handles early payoff before you sign it.
From there it is one dedicated advisor, start to finish, who knows what a continuation sheet and a conditional lien waiver look like, and a decision made in-house. Once documents are signed, the move to funds is measured in days, not weeks.
Sources
- [1] FAR 52.232-27, Prompt Payment for Construction Contracts — Federal Acquisition Regulation, Acquisition.gov (2017). Progress payments are due 14 days after the designated billing office receives a proper payment request; the subcontract clause requires the prime contractor to pay subcontractors within 7 days of receiving payment.
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Frequently asked questions
How do general contractors pay subcontractors before the owner pays them?
Most commercial GCs carry the gap out of their own working capital — cash reserves, a bank line, or short-term working capital sized to the float — because key subs on the critical path cannot wait the full owner cycle. Pay-when-paid clauses shift part of the wait down the chain, but self-performed payroll and general conditions never had that option.
Can a commercial GC get working capital while a pay application is in review?
That is one of the most common gaps short-term working capital is used for. It is sized to the deepest week of the float across your jobs, not to the contract value, and repaid as the applications pay. Bring the schedule of values and each application's status — they explain the lumps in your deposits.
How long do owners take to pay commercial construction pay applications?
Commonly 30 days after the application is approved, which in practice often means 45 to 60 days or more after submission once review, certification, and any lender inspection are counted. Federal jobs run on a regulated prompt-payment clock; private work runs on the contract and, in many states, a prompt-payment statute.
Does retainage count when a general contractor applies for funding?
It is not in your deposits until it releases, but stating it gives a fuller picture of what the business has earned. List the retainage owners hold from you and the retainage you hold from subs, with realistic release windows; the difference is the part that is genuinely yours and genuinely waiting.
Should a GC use working capital to cover a loss on a job?
No. Capital bridges timing, not margin. If a job was bid below cost or is running past what the contract will pay, borrowing extends the loss and can strain your bonding. The fix lives in change orders, the owner conversation, and the next bid.
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Published by Express Capital Funding, a direct lender to U.S. small and mid-sized businesses. This article is general information, not financial, legal, or tax advice, and is not an offer or commitment to lend.
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