As a subcontracting executive, you’re constantly navigating operational challenges: demanding project schedules, managing field and office teams, and above all, keeping an eye on your cash flow. In an industry where long payment cycles are the norm, a proactive capital strategy is how you create the foundation for stability and growth.
In the final installment of our two-part Subcontractor Meetup series, industry veterans Travis Mayor of Billd, Johnny Johnson of Cruzumi CFO and Advisory, and Raul Pacheco, owner of RDP Electrical, showed subcontractors how they can build a capital strategy that:
- Bridges the funding gap
- Allows you to use profits strategically
- Strengthens supplier relationships
If you missed the live Meetup, we’ve got you covered. Here are some of the key recommendations from the event.
Table of Contents
How Subcontractors Can Manage the Funding Gap
One of the most pressing challenges in commercial construction is the funding gap: the financial deficit between the amount of expenses subcontractors need to cover, and how much capital they have at their disposal between readily available working capital and cash from their projects. The funding gap is a natural byproduct of the way payments work in the construction industry, and something that subcontractors of all sizes have to overcome.
While subcontractors wait nearly 60 days on average to receive payment after submitting an approved invoice, they are still expected to cover all their expenses on time. This creates a challenging environment for subcontractors to navigate because many only have enough capital to cover operating expenses for three to six weeks, according to Mayor. This razor-thin margin of error means relying on cash alone is a risky endeavor.
The best way to overcome this problem is by proactively securing a diverse set of working capital options that can help subcontractors manage long payment timelines and keep operations running smoothly. Johnson said securing different capital options before you need them is beneficial because not only can it help ensure you’re ready to manage unexpected expenses and project delays, but you can also secure better terms and credit limits if you’re requesting new credit options or credit increases before you need to use them. Additionally, Pacheco said that only a construction-specific financial partner like Billd could truly close the funding gap for RDP, allowing them to fund all their projects so that they can focus on growth.
Create a Strategic Plan for Your Profits
Keeping your retained profits in the business as working capital—something 40% of subcontractors report doing according to the 2025 National Subcontractor Market Report—may feel like a way to create a financial buffer to manage cash flow instability, but it’s often a practice that limits growth.
Johnson warned that relying on profits as a source of working capital can cause a cash flow constraint, and many times it turns into a cash flow crisis. Additionally, there is an opportunity cost to using profits to cover expenses—it means missing out on investing back into your business.
Instead, Johnson recommends building retained earnings as part of a strategic move that strengthens your balance sheet instead of using retained earnings to cover expenses. As Pacheco said, a strong balance sheet was RDP Electrical’s first priority when they needed to increase their bonding capacity to take on bigger projects.
Using profit strategically instead of reactively also allows your business to be prepared. RDP Electrical was able to use their capital reserves to pre-purchase materials during the COVID-era supply chain disruptions. This helped their GCs avoid liquidated damages and ultimately created a strong relationship, making them a preferred subcontractor to their GCs.
Strengthen Relationships—and Terms—with Suppliers
81% of subcontractors have supplier terms of 45 days or less. This mismatch between supplier terms and subcontractor payment timelines means subcontractors either need to supplement their terms with additional sources of capital or risk paying their suppliers late, which directly impacts not only relationships, but also unit costs. Suppliers report increasing unit costs an average of 11% for subcontractors who pay outside of terms.
To negotiate better terms and pricing, subcontractors need to think proactively about how they can cover their material costs and keep supplier relationships strong. Pacheco said showing a strong balance sheet and project pipeline to his suppliers created a positive impact on his relationship with suppliers. This financial confidence helped RDP build a relationship where their supplier provided valuable market trends, like predicting a copper price drop, that saved the company hundreds of thousands of dollars. Additionally, they were able to secure extended terms due to their strong financial performance.
Final Takeaway: Create a Plan Today that Will Create Long-Term Success
The capital strategy you create today can help you build success in the future, whether that means improving profitability, stabilizing your operations, or growing topline revenue year over year. Johnson stressed that you shouldn’t wait until year-end to clean up your financials or negotiate with vendors. Instead, determine today what goals you’re working toward in your business. Whether you want to increase bonding capacity or strengthen your balance sheet, the key is to create a proactive capital strategy today.
To watch the Meetup on demand, visit our Events page to watch the full recording.
