Guide · Borrowing

How much can a construction company borrow?

There's no single limit. Lenders ask three questions: can your earnings cover the payments, what is the equipment worth, and which of your receivables can they lend against? Each loan has to pass the tests that apply to it, and the tightest one sets the amount.

Checked November 4, 2026

Three limits, three kinds of loan

Earnings limit. Applies to everything you borrow. It caps your total yearly debt payments.
Equipment value. Sets the size of a loan on a machine or truck.
Borrowing base. Sets how much of a line of credit you can actually draw.

Start with earnings, because every loan's payments count against that limit.

The earnings limit: debt service coverage

Debt service coverage is your yearly earnings divided by your yearly debt payments, principal and interest together. Lenders usually start from EBITDA (earnings before interest, taxes, depreciation and amortization), adjusted for one-time items.

Lenders set their own minimums. Many look for 1.25x. On SBA 7(a) loans, one summary of SBA's lending rules lists 1.15x for most loans above $350,000 and 1.25x for buying a business, the second since October 1, 2026. These are floors. Your lender can ask for more.

Here's an example. The company is made up; put in your own numbers.

EBITDA $600,000 Divide by 1.25x coverage $480,000 a year Existing debt payments −$96,000 a year Room for new payments $384,000 a year ($32,000 a month)

At 1.15x the same earnings would allow about $521,739 a year in total payments. That's the gap a lender's minimum makes. To turn the room into a loan size, use the how much can I borrow calculator.

Construction earnings swing with the jobs you land. A lender may look past a single strong year, so be ready to explain any big jump or drop, job by job.

Equipment loans: what the machine supports

With an equipment loan, the equipment itself is the collateral. That usually makes it the easiest kind of debt for a contractor to get. What to expect:

Down payment. Often 10% to 20%. Some lenders offer 100% financing, but that is generally reserved for the best borrowers.
Used equipment. Lenders often finance 60% to 85% of the cost and may want an appraisal.
Term. Many lenders go up to five years, some longer. The term generally won't exceed the machine's useful life.
Rate. Published ranges run about 9% to 30%, depending on the asset and your credit. Treat those as a broad range, not a quote. For reference, the bank prime rate was 7.00% in late October 2026.

The machine sets the loan size, but the payments still come out of your earnings room. A $400,000 excavator with 20% down is a $320,000 loan. At an example rate of 9% over five years, that's about $6,643 a month, or $79,712 a year.

Lines of credit: the borrowing base

A line of credit covers the gap between paying crews and suppliers and getting paid. The limit on the paper may be higher than what you can draw. Many lines are capped by a borrowing base: a share of your receivables, and sometimes your inventory, recalculated regularly.

Published ranges are 70% to 85% of receivables and lower for inventory (25% to 60% is typical). This is where construction differs from most businesses, because much of what customers owe you may not count:

Retainage. Excluded until it's released, as a rule.
Invoices over 90 days old. The most frequent exclusion. Some lenders drop a customer's whole balance if too much of it is past due.
Progress billings. Typically not eligible at asset-based lenders. Practice at banks varies, as contractors and bankers describe on a CFMA forum (an older thread, from 2010, but the issue hasn't changed). Ask about this first.
Bonded jobs. Sureties want first claim on the receivables from jobs they bond, which can conflict with your lender's lien. Some banks count them at a steep discount; others won't lend against them at all.
One big customer. The part of one customer's balance above about 20% to 25% of eligible receivables is often left out.

Continuing the example, with an 80% advance on receivables and 50% on inventory:

Total receivables $1,500,000 Less retainage −$200,000 Less over 90 days −$100,000 Less bonded jobs −$300,000 Eligible receivables $900,000 At 80% $720,000 Inventory $100,000 at 50% $50,000 Borrowing base $770,000

So $1.5 million of receivables supports about $770,000 of line in this example. Interest on what you draw counts as a debt payment too: $500,000 drawn at 9% is $45,000 a year.

Putting the example together

Room for new payments $384,000 Equipment loan payments −$79,712 Line interest −$45,000 Room left $259,288 Coverage if you stop there: $600,000 ÷ ($96,000 + $79,712 + $45,000) = 2.72x

The remaining room would carry about $1.7 million more at 9% over 10 years, but that is the earnings ceiling, not a likely offer. The lender would also weigh collateral, your balance sheet and your work backlog. If you're bonded, ask your surety before adding debt, since it may have its own views on your balance sheet.

Where SBA loans fit

SBA doesn't lend this money directly in a 7(a) loan; it guarantees part of a loan from a bank. A few facts worth knowing:

The maximum 7(a) loan is $5 million. Since July 2026, eligible borrowers can combine 7(a) and 504 loans for up to $10 million.
Equipment terms run up to 10 years, longer for equipment with a longer useful life. That can lower the yearly payment compared with a five-year loan, though you pay interest for longer.
A CAPLines Contract loan funds costs tied to specific contracts, up to $5 million.
The 7(a) Working Capital Pilot offers monitored lines of credit up to $5 million, for businesses with at least 12 months of operations.

How to borrow more

Collect old invoices. Getting a balance under 90 days can move it back into your borrowing base.
Bill retainage the day it's due. Released retainage turns into cash or eligible receivables.
Refinance expensive short-term debt. Stretching a payment over a longer term frees up coverage.
Clean up your job reporting. Clear job costs and a current schedule of work in progress make your earnings easier to believe.
Forecast the cash first. The 13-week cash flow template shows how big a line you actually need and when.

This guide is general information, not financial or legal advice. Rates and lender rules change, so confirm them with your lender.

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Sources

All checked November 4, 2026.