May 1, 2026
What is a line of credit for a restoration company? A business line of credit is a revolving credit facility providing access to funds up to a maximum limit, used to bridge the gap between job costs incurred and insurance or TPA payments received. It is the primary working capital tool for growing restoration companies managing 45-90 day payment cycles.
A line of credit is one of the most useful financial tools available to a growing restoration company. It’s also one of the most misused. When used correctly, it’s a cash flow management instrument — a short-term bridge between job costs and TPA payment receipt. When used incorrectly, it becomes a slow-motion financing of losses, with a growing balance that masks underlying profitability problems.
Formula: Monthly revenue × (average days to payment ÷ 30) × direct cost percentage = working capital requirement. Example: $250K monthly revenue × (75/30) × 0.55 = $343,750 needed. If you’re drawing a $200K line to its maximum regularly, you’re underfunded. Set your limit 20-30% above your calculated working capital requirement. Plan for where you’re going, not where you are.
The balance never goes to zero. You’re drawing to fund payroll every period. The balance is growing with revenue faster than expected. You think of the line as your money. A healthy line of credit cycles — up when jobs are active, down as collections come in. A line that hasn’t had a zero balance in six months indicates the business is consistently unprofitable or the line is funding losses.
Factoring involves selling outstanding invoices to a third party at a discount (2-5%) for immediate cash. The cost is higher than a bank line, but it scales automatically with revenue without requiring credit limit increases. Some restoration companies use factoring as a bridge while building banking relationships, then transition to a traditional line as the balance sheet strengthens.
Yes. Establishing a line of credit when you don’t need it — when your balance sheet is strong — is far easier than establishing one during a cash crisis. Having available credit you don’t use costs nothing (or minimal commitment fees) and provides significant optionality for growth and emergencies.
Typically: 2-3 years of business tax returns, current year-to-date P&L and balance sheet, current AR aging report, and personal financial statements from all owners with 20%+ equity. Clean AR quality with low 90+ day balances significantly improves approval likelihood.
Mike McCabe is The Profit Detective — a 36-year restoration industry veteran and Fractional Operations Manager at Floodlight Consulting Group.
Most engagements pay for themselves within the first week.