How to Actually Get a Line of Credit as a Contractor (And How Much You Really Need)

If this is you

You won the project. Cash gap is real. You're going to need outside capital to bridge weekly payroll until the GC payments arrive. This post is the practical how-to: who to ask, what they want to see, how to size the ask, and what to do if you've never done this before. (If you haven't read why an LoC is often not the right fix in the first place, start here — but assuming you've decided you need one, this post is the playbook.)

A business line of credit is the most common cash-flow instrument for service businesses bridging timing gaps. Used right, it's flexible, relatively cheap, and doesn't lock you into multi-year debt. Used wrong, you over-borrow, pay too much in interest and standby fees, and end up reliant on the LoC for operating expenses that should be funded by margin.

This post covers the practical mechanics: where to apply, what they look at, what documentation to prepare, and how to size the ask correctly. If you've never gone through a commercial loan application, this is the field guide.

Who actually gives contractor LoCs

There are four lender categories. Each has different criteria, speed, pricing, and ceiling.

1. Local community banks and credit unions

The default starting point for most small contractors. Relationship-driven, willing to look at the whole business not just the credit report, and often the only lenders who will work with companies under $1M revenue.

Typical LoC size: $25K - $500K
Approval timeline: 2-6 weeks
Pricing: Prime + 1-3% (currently 9-11% range)
Personal guarantee: Almost always required for sub-$5M revenue businesses
What they want: 2 years of tax returns, 12 months of business bank statements, P&L and balance sheet, personal financial statement, and time with the local relationship manager

2. National banks (Chase, Wells Fargo, Bank of America)

Larger ceiling, faster online process, but stricter underwriting. Generally not interested in sub-$1M revenue contractors unless you have a strong existing banking relationship.

Typical LoC size: $100K - $5M+
Approval timeline: 2-4 weeks
Pricing: Prime + 0.5-2% (typically 8-10%)
Personal guarantee: Required for businesses under $10M revenue
What they want: Same documentation as community banks plus formal financial statements (often reviewed or audited for larger asks), tax returns for the entity AND personal returns for guarantors, and frequently real estate collateral for asks above $500K

3. SBA-backed lenders

The SBA Express program guarantees up to $500K of an LoC, the SBA 7(a) program goes higher. SBA backing makes it easier for borderline-qualified businesses to get approved, in exchange for slower processing and additional fees.

Typical LoC size: $100K - $5M
Approval timeline: 6-12 weeks (the slowest option)
Pricing: Prime + 1-2.75% plus a one-time SBA guarantee fee of 0.25%-3.75% depending on size
Personal guarantee: Always required
What they want: Everything above plus an SBA loan application package, business plan documentation, and detailed use-of-funds narrative

SBA-backed loans are useful when the borrower wouldn't qualify for conventional financing — but the timeline rarely works for an active project with cash needs in 30-60 days. Best used for proactive working capital planning, not emergency bridge financing.

4. Online and fintech lenders (Bluevine, OnDeck, Credibly, etc.)

Fast, expensive, and risky. Approval often within 24-72 hours based on bank statements alone. Pricing is dramatically higher than traditional bank LoCs.

Typical LoC size: $25K - $250K
Approval timeline: 1-7 days
Pricing: 18-50%+ APR equivalent (often quoted as a "factor rate" that obscures the true APR)
Personal guarantee: Almost always
What they want: Bank statements, basic business info, sometimes a credit pull

Use these only as last-resort emergency capital. The pricing erodes margin to the point where you're often better off losing the project than financing it through these.

What lenders actually look at

The five things every commercial lender evaluates, in roughly this order:

1. Debt Service Coverage Ratio (DSCR)

Your annual EBITDA divided by total annual debt service (existing debt principal + interest, plus the new LoC's projected interest). Lenders want DSCR ≥ 1.25x as a minimum, with 1.5x+ being comfortable.

For a contractor with $200K of EBITDA and $50K of existing debt service, asking for a $300K LoC at 10% interest:

Projected new interest if fully drawn: $30K/year
Total debt service: $80K
DSCR: $200K / $80K = 2.5x ✓ comfortable

If the same contractor asked for a $1M LoC at 10%:

Projected new interest if fully drawn: $100K/year
Total debt service: $150K
DSCR: $200K / $150K = 1.33x — barely passing

Lenders model DSCR assuming you fully draw the LoC. This is why over-asking for capacity hurts your application.

2. Time in business and revenue trend

Most banks require 2+ years in business for an LoC. Some flexibility for 12-18 months with strong financials. Revenue should be flat or growing year-over-year. Declining revenue is a near-automatic decline.

3. Personal credit and personal financial position

Even on an LLC or S-corp LoC, lenders pull personal credit on the guarantors. FICO 680+ is typical minimum. 720+ gets better pricing. Below 650 is hard to approve at conventional banks.

Personal financial statement (PFS) shows the guarantor's net worth, liquid assets, and existing personal debts. Liquid assets equal to 6-12 months of business operating expenses is a strong signal.

4. Industry and concentration risk

Construction is considered a higher-risk industry than most service categories. Within construction, residential is typically lower risk than commercial; commercial is typically lower risk than spec/development.

Customer concentration matters. If one customer is more than 30% of your revenue, that's a flag. The lender will ask about contract terms and what happens if you lose that customer.

5. Collateral

Most LoCs are secured. Common collateral: business equipment, accounts receivable, inventory, and the personal residence of the guarantor. SBA loans always have a collateral requirement.

For asks under $250K, sometimes unsecured (or "blanket UCC-1") is acceptable. Above $250K, expect to pledge specific collateral.

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Documentation checklist

Have these ready before you walk in:

Business documents:

2 years of business tax returns (Form 1120-S for S-corps, 1065 for partnerships, 1040 Schedule C for sole props)
2 years of business financial statements (P&L and balance sheet)
Year-to-date P&L and balance sheet (most recent month)
12 months of business bank statements
AR aging report (most recent month)
AP aging report (most recent month)
List of major customers and contracts
Articles of incorporation and operating agreement
Business license

Personal documents (for each guarantor):

2 years of personal tax returns
Personal financial statement (PFS) — most banks have a template
Personal bank statements (3-6 months)
Driver's license / ID
Social Security number for credit pull authorization

Project-specific (if asking for capital tied to a specific job):

Signed contract
Cash flow projection for the project
Bond documentation (if applicable)

A clean, complete documentation package is the single biggest accelerator of approval timeline. Banks that get incomplete packages bounce them back; reapplications take weeks longer than getting it right the first time.

How to size the ask correctly

This is where most contractors get it wrong. The default is "ask for as much as I can get because bigger is safer." That's wrong for three reasons:

Bigger LoCs cost more in standby fees (typically 0.25-0.5% per year on the unused portion)
Bigger LoCs hurt your DSCR (lenders model the full draw, even if you'd never use it)
Bigger LoCs delay approval because they require more underwriting

The right size is your peak cash gap from a real model, plus a 30-day buffer.

For a contractor with a $300K modeled peak cash gap on a project, the right LoC ask is roughly $375K-$400K (peak gap + one extra month of payroll cushion). Not $1M.

If you don't have a model, build one before applying. Our cash math walkthrough shows how. Or we can help model it.

What to do this quarter

If you're approaching a project that needs an LoC:

Action 1: Run the cash gap model first. Don't ask for capital before you know how much you need.

Action 2: Pick the right lender category. Community bank for first-time, sub-$500K asks with relationship value. SBA for proactive planning with longer timeline. National bank if you have an existing relationship and revenue is over $2M.

Action 3: Get the documentation package together before you walk in. Clean, complete, organized. The bank's underwriter will tell their boss "this one's easy" and that helps.

Action 4: Apply 60-90 days before you actually need the capital. Approval timelines slip. Project timelines slip. Get the LoC in place before the cash crunch lands, not during.

The application process is mechanical. The hard part is sizing the ask correctly and having a real model behind it. Walk in with that, and you've already done more preparation than 80% of the contractors the bank sees.

Calculate your peak cash gap before applying or book a free 30-min audit and we will model your specific project and help you size the LoC ask correctly.

Stop letting cash sit in someone else's bank account.

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