Construction Subcontractor Financing Guide: HVAC, Electrical, Plumbing Equipment + Factoring

If you're running an HVAC, electrical, or plumbing business, you already know this truth: the best opportunity often arrives before you have the cash to take it. A commercial bid lands on your desk with a 2-week timeline. Your crew needs tools and materials to start. Your existing invoices won't be paid for 30-60 days. And the biggest margin project of your year sits on the table waiting for a "yes" or a "no."

This is exactly where most subcontractors get stuck. They have the expertise, the crew, and the customer. What they don't have is the $50K, $100K, or $200K+ in working capital to bridge the gap between project costs and customer payment.

Growth-minded operators know there's a solution. It's not choosing between equipment and payroll. It's combining equipment financing with invoice factoring—a two-part strategy that lets you fund growth without gambling with your business's survival.

Here's the concrete breakdown for each trade, with real numbers and a clear action plan.

HVAC Contractors: Managing Seasonal Equipment Needs + Cash Flow

The Equipment Reality for HVAC Businesses

HVAC contractors face a unique challenge: seasonal demand creates feast-or-famine cash flow, but equipment needs don't pause for the off-season. You need compressors, manifold gauges, refrigerant recovery machines, and diagnostic tools ready when jobs appear.

Here's what modern HVAC equipment actually costs:

Essential startup HVAC tools and equipment:

High-grade hand tools (pipe wrenches, brazing kits, tubing cutters): $2,000–$4,000
Power tools (impact drill sets, reciprocating saws, threading machines): $3,000–$6,000
Diagnostic equipment (manifold gauges, digital multimeters, leak detectors): $2,500–$5,000
Refrigerant recovery and recycling machines: $4,000–$8,000
Service van or truck (used but well-maintained): $15,000–$25,000
Total for one fully-equipped tech: $26,500–$48,000

Upgrading existing equipment:

Trenchless/specialized tools: $5,000–$15,000
Additional service vehicles: $18,000–$30,000 per truck
Advanced diagnostic systems (thermal imaging, pressure testers): $3,000–$8,000

The problem isn't the tools themselves. The problem is timing. Winter HVAC calls spike November–February. To be ready, you need equipment in September. But September revenue? Often light. And you're still collecting on August invoices.

Real Scenario: HVAC Business Wins $200K Commercial Contract

Situation: A 40-unit apartment complex retrofit. Timeline: 6 weeks. Your team can handle it—but you need two additional sets of equipment and a second van to manage the workload simultaneously.

Equipment and vehicle needed: $35,000 (extra tools, diagnostic gear, van)

Project payoff: Net-30 contract terms. You'll invoice $200K, but won't see payment for 30 days after project completion (roughly 7 weeks from start).

Cash flow crisis: Equipment cost is due immediately. Payroll for this project (crew for 6 weeks) is $45,000. Materials are another $38,000. That's $118,000 in direct costs over 6 weeks. Your customer pays in week 7. You're $118K in the hole while that money sits in accounts receivable.

Strategic Solution: Equipment Financing + Invoice Factoring

Part 1: Equipment Financing ($35,000)

Loan term: 5 years at ~8.5% APR (standard for trade contractors)
Monthly payment: ~$680
Total cost: $40,800 over 5 years
Tax benefit: Depreciation deduction (consult with your accountant on the exact benefit based on equipment type and your business structure)

Why this makes sense: You own the equipment, can depreciate it for tax purposes, and the payment is predictable. This isn't emergency financing—it's strategic capital deployment. The $680/month fits into operations once you have the job cash flow flowing.

Part 2: Invoice Factoring ($200K invoices)

After project completion, instead of waiting 30 days for the customer payment:

Factor rate: 1.5–2.5% for trade contractor invoices (factors understand HVAC payment patterns)
Advance rate: 80–90%
Funding timeline: 24–48 hours after approval
Cash you get upfront: $160,000–$180,000 (depending on advance rate)
Your net cost: $20,000–$40,000 in factoring fees when customer pays

The real math: You deploy $35,000 in equipment. You incur $118,000 in immediate project costs. Factoring gets you $160K–$180K within 48 hours of invoice submission. That covers all project costs plus the equipment payment. When the customer pays (day 30), the factor takes their fee and sends you the remainder. Your net cash flow looks like this:

Cash in hand (day 1–2 via factoring): +$160,000
Equipment financing payment (first month): -$680
Operational expense (payroll, materials already paid): -$118,000
Net position after project costs: +$41,320 cash available

That's the strategic play. You're not choosing between growth and survival—you're funding both.

HVAC Contractor Payment Patterns to Know

HVAC commercial work typically flows like this:

30% retainage is common (customer holds 30% until final sign-off)
Net-30 or Net-60 terms are standard
Retainage factoring is available but costs more (another 0.5–1% on top of regular factor rates)
Specialty jobs (systems integration, energy-efficient retrofits) often command Net-45 or longer payment terms

What this means for financing: Budget for 45–60 day payment cycles, not 30. That's why factoring is so valuable—it compresses that timeline to 2 days.

Electrical Contractors: Managing Project Sequencing + Material Costs

The Equipment Reality for Electrical Contractors

Electrical contractors face different pressures than HVAC. Your biggest cash drain isn't always equipment—it's materials purchased upfront, plus the timing gap between purchasing materials and getting paid.

A commercial wiring job might require $50,000 in copper wire, breakers, panels, and specialty electrical components purchased weeks before invoicing. If you're waiting 45 days to get paid and you've already paid suppliers $50,000 upfront, that's brutal cash flow math.

Here's what electrical contractors budget for equipment:

Essential startup tools and equipment:

Hand tools (screwdrivers, wire strippers, fish tape, multipurpose tools): $1,500–$3,000
Power tools (drill sets, reciprocating saws, rotary hammers): $3,000–$6,000
Diagnostic equipment (multimeters, clamp meters, circuit tracers): $1,500–$3,500
Specialized tools (hydraulic crimpers, knockout sets, thermal imagers): $2,000–$4,500
Testing equipment (voltage testers, insulation testers): $1,000–$3,000
Service truck or van: $15,000–$25,000
Total per electrician: $23,000–$44,500

But the real expense? Materials for jobs. And here's where factoring becomes critical.

Real Scenario: Electrical Contractor Wins Gas Station Electrical System Retrofit

Situation: Extensive wiring for underground fuel storage systems at retail gas stations. $280,000 contract. Net-45 payment terms from general contractor. 8-week project timeline.

Materials needed: $85,000 (copper wire, specialized fuel-safe conduit, programming costs, breakers)

Your immediate cash needs: $85,000 for materials + $65,000 for crew payroll (8 weeks) = $150,000 cash required before you invoice a single dollar.

The wall: You invoice $280,000 on completion. Customer doesn't pay for 45 days. You're $150,000 in the hole while this six-figure payment sits in receivables.

Strategic Solution: Vendor Lines of Credit + Invoice Factoring

Part 1: Vendor Material Financing

Most major electrical distributors (Grainger, Rexel, Sonepar) offer contractor account financing on material purchases:

Invoice terms: Net-30 or Net-60 on business accounts
Interest-free period: Usually 30 days on approved purchases
Typical spend authority: $25,000–$75,000 depending on business history and credit

What this does: You're not paying for materials upfront. You're getting Net-30 terms, which buys you breathing room. Materials arrive, you use them on the job, you invoice the customer, and you have 30 days to pay the distributor.

But here's the catch: If the customer is Net-45 and your material vendor is Net-30, you're still timing-gapped by 15 days. That's where Part 2 comes in.

Part 2: Invoice Factoring ($280,000 project invoice)

Electrical contractor factoring rate: 1.75–2.75% for commercial projects
Advance rate: 80%
Funding timeline: 24 hours
Cash received: $224,000 (80% of $280K)
Your factoring cost: $4,900–$7,700 when customer pays

The real math: You deploy $150,000 in materials + payroll upfront (funded through a combination of vendor terms and operating cash). You submit the invoice immediately upon completion. Factoring advances $224,000 within 24 hours. You pay the material vendor their Net-30 amount ($85,000), keep $65,000+ in operating cash for the next project setup, and you're cash-positive on a quarter-million-dollar job.

Without factoring? You'd be $150,000 underwater for 45 days, unable to bid the next project.

Electrical Contractors and Factoring Advantages

Electrical work is factoring-friendly because:

Invoices are typically tied to completed milestones (easier for factors to verify)
Commercial clients have strong credit (factors approve more easily)
Retainage is often smaller than construction or HVAC (10–15% vs. 30%)
Specialty electrical work commands premium rates, making factoring cost worth the benefit

The specialist angle: Construction-focused factoring companies (like CapitalPlus, FundThrough, Clarify Capital) understand electrical contractor payment patterns and often offer better rates than generic factoring platforms.

Plumbing Contractors: Managing Equipment Upgrades + Project Scaling

The Equipment Reality for Plumbing Businesses

Plumbing has the lowest equipment barrier to entry of the three trades, but also the highest need for constant equipment reinvestment. Pipe inspection cameras, pressure testing systems, hydro-jetting equipment, and trenchless technology tools are expensive, depreciate quickly, and get replaced frequently as technology improves.

Here's what plumbing contractors budget for:

Essential startup tools and equipment:

Hand tools (pipe wrenches, basin wrenches, crimpers, cutters): $1,500–$3,500
Power tools (drill sets, reciprocating saws, impact drivers): $2,500–$4,500
Diagnostic equipment (pressure testers, thermal imagers, locators): $2,000–$5,000
Sewer camera systems: $3,000–$8,000
Service truck or van: $15,000–$28,000
Total per plumber: $24,000–$49,000

Advanced equipment (for commercial/specialized work):

Hydro-jetting equipment: $5,000–$15,000
Trenchless repair equipment (pipe-bursting): $8,000–$25,000
Pipe locating systems (advanced): $3,000–$8,000
Thermal imaging cameras: $2,000–$5,000

The difference? Plumbing equipment has strong resale value. A five-year-old camera system is still usable and can be sold or traded. This makes equipment leasing and upgrade financing particularly attractive for plumbing contractors.

Real Scenario: Plumbing Contractor Needs Fleet Expansion + Equipment Upgrade

Situation: You have four plumbers, strong backlog, but you're turning down jobs because you can't scale. New commercial clients want your plumbers for net-30 invoices. You need two more vans, upgraded sewer cameras, and trenchless equipment to handle commercial work.

Equipment and vehicles needed:

Two additional service vans: $35,000
Advanced sewer camera system and software: $6,000
Trenchless repair equipment: $12,000
Total: $53,000

Payoff: Adding capacity lets you take on $400K+ in new annual revenue through commercial contracts with Net-30 terms.

Strategic Solution: Equipment Financing + Factoring Bridge

Part 1: Equipment Financing ($53,000)

Plumbing-specific lenders (and the SBA 7(a) program) offer favorable equipment financing:

Loan term: 5–7 years (longer terms available for plumbing because equipment has resale value)
APR: 6.5–9% (better than generic business loans because equipment is collateral)
Monthly payment on $53K over 7 years: ~$750
Tax depreciation: Available depending on equipment type

Why 7 years? Plumbing businesses can use extended terms because the equipment holds value. A van depreciates slowly. A sewer camera system is still valuable after 5 years. Lenders know this, so they extend terms.

Part 2: Invoice Factoring for Commercial Jobs

Your new commercial clients are established businesses with Net-30 terms. You invoice $20K per job, but wait 30 days. That's cash you can't use to fund the next job.

Factoring rate for plumbing: 1.5–2.5%

Instead of waiting 30 days for each $20K invoice, factor them:

Submit invoice: Day 0
Cash in hand: Day 1 (85–90% of invoice)
Your net cost: $300–$500 per invoice
Customer pays factor directly: Day 30
Factor sends you remainder: Day 31

The real math: You finance $53,000 in equipment at ~$750/month. You take on $400K in new commercial work. If you do $20K invoices, that's 20 invoices per year. Factoring those invoices costs you $6,000–$10,000 per year in fees. But you're adding $400K in revenue. That's a 1.5–2.5% cost for $400K in growth. And your current cash flow covers $750/month in equipment payments.

Without factoring? You'd need $20K in working capital sitting available to fund each job cycle. With four jobs running simultaneously (typical commercial), that's $80K in float. Factoring eliminates that requirement.

Plumbing-Specific Factoring Considerations

Plumbing factoring is different because:

Residential jobs factor poorly (customer credit is weak)
Commercial plumbing factors easily (strong customer credit, predictable payment)
Retainage is typically 10–15% for plumbing
Specialized work (trenchless, commercial) commands premium rates

Strategic positioning: Position your new capacity for commercial and multi-unit work, not residential. That's where your factoring approval rate is highest and your factoring cost is lowest.

The Equipment vs. Factoring Decision: When to Use Each

This is the critical strategic question. You have limited capital. Should you invest in equipment, or use that capital for working capital and factoring?

Use Equipment Financing When:

Equipment has long-term utility (5+ years)
You can depreciate it for tax benefits (consult your CPA)
Resale value is strong (especially for plumbing and HVAC)
The equipment solves a specific capacity constraint

Use Invoice Factoring When:

Customer payment terms are net-30 or longer
You're leaving money on the table waiting for invoices
You have solid invoices (customers with good credit)
Working capital is your constraint, not equipment

The Smart Play (and why the best contractors use both):

Equipment financing addresses long-term capacity. Factoring addresses short-term cash flow. They're not either/or—they're both/and.

HVAC contractor using both: Gets $35K equipment loan to buy tools and van. Uses factoring on $200K commercial jobs to fund payroll and materials while waiting for payment.

Electrical contractor using both: Gets equipment financing for specialized tools. Uses factoring on $300K+ commercial wiring jobs because Net-45 terms from the GC would otherwise kill cash flow.

Plumbing contractor using both: Gets equipment financing to scale from 3 to 6 plumbers. Uses factoring on commercial jobs to maintain working capital as volume scales.

Real-World Approval: What Lenders Actually Look For

You need to understand what contractors are actually asking lenders, because factoring and equipment financing look very different from the lender's perspective.

Equipment Financing Approval Criteria

What lenders want to see:

Time in business: 2+ years (newer contractors have much tougher time)
Business credit score: 650+
Personal credit score: 680+
Revenue: $150,000–$200,000+ annually
Business tax returns: Last 2 years

What lenders are doing: Evaluating whether you can consistently make $650–$850/month payments. They don't care much about your invoices. They care about your operational revenue stability.

Invoice Factoring Approval Criteria

What factors want to see:

Your business credit matters: Less important (factors advance on customer credit, not yours)
Customer creditworthiness: Critical (factors evaluate who's paying the invoice, not your payment history)
Invoice quality: Everything (Net-30 invoices from Fortune 500 companies advance faster than Net-60 invoices from small businesses)
Business longevity: Helpful but not required (many factors work with contractors under 2 years)

What factors are doing: Evaluating whether your customer will pay. They don't care about your credit score—they care about whether Verizon or a major hospital is going to pay that invoice.

This is the insider secret: You can be a startup with mediocre personal credit and get factoring approval if your invoices are from creditworthy clients. Conversely, you can have excellent personal credit and get rejected for factoring if your invoices are from slow-paying small businesses.

Your 30-Day Action Plan (October 2025)

If you're running an HVAC, electrical, or plumbing business and you've been leaving growth on the table, here's your timeline to capture it.

Week 1 (Today through October 10):

Identify your immediate equipment needs (which trade tools matter most for your next contract?)
Pull last 2 years of business tax returns
Get your business credit report (AnnualCreditReport.com)
Email invoice factoring companies (CCapitalPlus, FundThrough, Clarify Capital) and request preliminary approval based on customer types you work with

Week 2 (October 13–17):

Compile equipment quotes from vendors
Compare equipment financing options: local bank, SBA 7(a), online lenders (OnDeck, Fundbox), trade-specific lenders
Get a pre-approval for equipment financing (most online lenders give decisions in 24–48 hours)
Finalize factoring pre-approval with two 2–3 factoring companies

Week 3 (October 20–24):

Lock in equipment financing rate (rates can fluctuate; lock yours now while October rates are competitive)
Set up your factoring account so you're ready to submit invoices the moment you land the next job
Review the combined payment structure: equipment payment + factoring cost + operating expenses

Week 4 (October 27–31):

Execute equipment purchase and financing
Take the next bid/contract that previously felt out of reach
Submit your first invoices to factoring within 24 hours of completion
Track the math: Compare what you made vs. what factoring cost you

Bottom Line: The Growth Opportunity in Front of You

October 2025 is the time contractors actually use this strategy. By November, busy season hits. New Year brings tax planning that changes your options. Now is when you can layer equipment financing + factoring and actually execute growth without betting your business on timing.

HVAC contractors: Stop turning down winter retrofit projects because you can't access $30K–$50K in seasonal equipment. Finance the tools, factor the commercial jobs, and capture $200K+ in Q4 revenue.

Electrical contractors: Stop watching commercial wiring bids go to competitors because Net-45 payment terms kill your cash flow. Combine vendor material terms + factoring and suddenly $300K+ jobs become doable without huge cash reserves.

Plumbing contractors: Stop working at maximum capacity with current crew because you can't afford to add another van + truck. Finance the equipment, factor commercial jobs for working capital, and scale from 4 plumbers to 6.

The operators who grow fastest aren't the ones with the most cash on hand. They're the ones who understand how to layer financing tools strategically: equipment financing for long-term capacity, invoice factoring for short-term cash flow, and the discipline to deploy both only on jobs that actually move the needle.

That strategy is available to you right now.

Ready to explore what this looks like for your specific trade? With almost 2 decades under their belt and hundreds of 5 star reviews with an A+ from the Better Business Bureau, we partner with Advance Funds Network to provide financing that helps businesses truly scale, FAST. If you're a growth-minded operator and want to gain the means to do what matters: Get Started Today