Cliffbank Lenders, a small-business funding service in Merced, California, explains how Merced County contractors pay for materials before draws or invoices are paid: supplier credit accounts, customer deposits, a contractor line of credit, and who pays for materials when work is subcontracted. It cites Census counts of local builders and permits. Funding partners decide on every request.
The gap on a typical job
A remodel or a new house moves through stages. Materials for each stage are ordered before the stage starts. The draw or progress payment for that stage arrives after it is done and inspected, sometimes weeks later, often minus retainage. Multiply that by several jobs at once and a profitable contractor can run short of cash.
Merced County, CA had 415 construction employer establishments in 2023, 62.2% of them with fewer than five employees (County Business Patterns), and new homes authorized county-wide rose from 406 in 2023 to 780 in 2025 (Building Permits Survey). Permit counts do not measure any one contractor's workload; they are context only.
1. Supplier credit accounts
Lumber yards and supply houses may offer trade accounts on their own payment terms. A trade account is one bridge to compare with the others on total cost. Its limit depends on the supplier's own review, and a supplier may raise it when you pay on time.
2. Customer deposits
On remodels, a deposit at signing can cover the first materials order. On new construction, the first draw may come only after the foundation is in, so deposits help less.
3. Drawing on a contractor line of credit
A contractor line of credit is a flexible bridge: draw for materials on each job, repay when the draw arrives, draw again. A construction line of credit for a contractor works well when the balance regularly comes back down; one that stays near its limit may mean jobs are not paying as planned.
Illustration only: a builder draws $26,500 for framing lumber and trusses, receives a $41,000 draw three weeks later, and repays the line. Interest runs only for those three weeks on the drawn amount.
4. Working capital for a large contract
A single large contract may need more than the line allows. A short working capital loan sized to that contract's material and payroll gap, repaid from its payments, can work, provided the contract's payment schedule is in writing.
Do subcontractors pay for materials?
It depends on the subcontract. Some subs supply labor only; others, such as painting, drywall and flooring subcontractors, may supply their own materials and be paid after the general contractor receives its draw. Read the subcontract for who buys what and when payment is due, because the sub carries the gap if it buys the materials.
Records that help
A list of jobs in progress, the contracts, supplier statements and a current license record. The contractor license lookup guide shows how to check yours, and the contractor page covers equipment and payroll funding too.
Keeping the gap small
Invoice each stage the day it is done, ask the owner or construction lender how long inspections take, and order materials for the next stage only once the previous draw is scheduled. Small habits like these shrink the gap a line has to cover and the interest it costs.
By Cliffbank Lenders · Updated
