Case Study — SMB Tier
How a specialty HVAC contractor survived their first large commercial job
A residential HVAC contractor won their biggest contract: a $2M commercial building installation. Between weekly prevailing-wage payroll and the 60-day AR cycle on commercial work, they were about to float roughly $300K of cash before the first GC payment landed. They thought they needed a $500K line of credit. They needed something different.
~$300K
Peak cash gap modeled before draw #1
$180K
Right-sized LoC (vs. $500K they were going to take)
$2.4K/mo
Interest saved by not over-borrowing
12 wk
Cash forecast updated weekly through completion
The Challenge
From residential HVAC service to a $2M commercial contract
Prevailing-wage payroll requirements
The project carried a prevailing wage requirement, meaning HVAC technicians had to be paid the county wage scale — weekly payroll running 30–50% above standard residential rates. The labor cost was underpriced in the original bid because the owner hadn't modeled it.
60-day AR on commercial work
Residential customers pay on the spot or within 30 days. Commercial GCs pay 30 days after the monthly draw is approved, which is 30 days after billing. Effective AR cycle: 50-60 days from labor outlay to cash arriving.
5% retainage withheld
GC contract held back 5% of every payment as retainage, released at substantial completion. On a $2M project, that's $100K sitting at the GC for 6+ months after the job is done — invisible to most subs until it bites.
Bookkeeper said 'ask your accountant'
Standard pattern. The bookkeeper records the past. The accountant files taxes. Neither one builds a forward cash forecast. The owner asked 'what can we afford next month?' and got a shrug.
What We Did
Modeled the cash gap. Right-sized the LoC. Built the weekly forecast.
Four steps over the first 10 days of the engagement. The owner never saw a cash crunch on the project — because we saw it before they started.
Mapped the prevailing-wage payroll cycle against the GC draw schedule
HVAC technicians get paid weekly. The GC pays approved draws on a 30-day-after-billing cycle. Subcontractor billing has its own 5-7 day cycle. We mapped every dollar of labor and materials against expected cash inflow week by week.
Modeled the peak cash gap
Week 1: payroll out, no money in. Week 4: first invoice goes to GC, still no money in. Week 8: first GC payment lands. Modeled peak working-capital float at roughly $300K — including 5% retainage withheld until substantial completion.
Sized the line of credit to the actual gap
Owner was going to ask for $500K because 'bigger is safer.' We showed them the math: a $180K LoC fully covered the modeled gap with a 30-day buffer, at half the interest cost. Banks also approve smaller LoCs faster.
Set up a weekly cash forecast through job completion
13-week rolling forecast updated every Friday. Tracks actual labor cost vs. budget, material spend vs. budget, GC payment timing, retainage release projection. When the forecast drifts, the owner sees it the same week — not at year-end.
Results
What they actually got
~$300K
peak cash gap, modeled before any payroll went out
Without the model, the owner was guessing. With the model, they could see week-by-week exactly when cash got tight, when it recovered, and what each scenario looked like if labor or materials ran over.
$180K LoC
right-sized vs. the $500K they were about to ask for
The bigger LoC felt safer but cost more. Smaller LoC fully covered the modeled gap with a 30-day buffer. Faster bank approval, half the standby fees, half the interest if drawn.
$2.4K/mo
interest saved by not over-borrowing
On 8% LoC interest, $320K of unused capacity would have cost roughly $2,100/month in interest if drawn — plus standby fees on the unused portion. We sized it to actual need, not paranoia.
Weekly forecast
13-week rolling cash view, updated every Friday
Tracks labor cost vs. budget, materials, GC payment timing, retainage release. The single change that flips an owner from 'flying blind' to 'I know what's coming.' That's the whole product.
I thought I needed a $500K line of credit. Level showed me I needed a $180K LoC and a weekly cash plan. The plan is the part that actually saved me — the LoC just kept me from missing payroll on week six.
Owner
Specialty HVAC Contractor — first large commercial project
What the Data Showed
The pattern behind the cash gap
Weekly payroll vs. 60-day AR is structurally cash-negative
This isn't a sign of a poorly run job. Every commercial subcontractor on prevailing-wage work has the same gap. The question isn't whether you'll need to float cash — it's how much, for how long, and whether you've planned for it. The model surfaces the answer before the bid goes out, not after the first payroll bounces.
The default LoC ask is almost always too big
Owners ask for "as much as I can get" because nobody has modeled the actual gap. Bigger LoCs cost more in standby fees, take longer to approve, and hide the cash discipline that should be baked into the project plan. A right-sized LoC is the second-best forcing function for cash discipline. The first is a real forecast.
Prevailing wages need to be priced into the bid, not absorbed after
First-time commercial subs frequently underbid on labor because they don't model the prevailing wage scale plus weekly payroll cycle. The labor uplift is often 30-50% above residential rates for the same work. The subsequent bid carried that math correctly, and the contractor is no longer leaving margin on the table.
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