To prevent cash flow problems at the end of a construction project, the contractor should obtain:

To prevent cash flow problems at the end of a construction project, the contractor should obtain:

• A. A line of credit from a bank
• B. A performance bond
• C. A trust account
• D. A credit card

Answer: (A)

Maintaining working capital to cover costs when payments from the owner are delayed is essential. A bank line of credit provides flexible, on‑demand funds you can draw to pay for materials, payroll, subcontractors, and finish-out costs during cash‑flow gaps. You only pay interest on what you actually borrow, and you can repay and re-borrow as the project progresses, which keeps the project moving without waiting for slow payments. This directly addresses end‑of‑project cash crunches that can stall closeout tasks or require expensive temporary financing. A performance bond guarantees project completion but doesn’t add cash to the business. A trust account is intended for handling client funds or regulatory requirements, not as a liquidity facility for contractor operations. A credit card can help for small, occasional expenses but typically has lower limits and higher ongoing costs, making it less suitable for the large, ongoing expenditures of a construction project.

Maintaining working capital to cover costs when payments from the owner are delayed is essential. A bank line of credit provides flexible, on‑demand funds you can draw to pay for materials, payroll, subcontractors, and finish-out costs during cash‑flow gaps. You only pay interest on what you actually borrow, and you can repay and re-borrow as the project progresses, which keeps the project moving without waiting for slow payments. This directly addresses end‑of‑project cash crunches that can stall closeout tasks or require expensive temporary financing.

A performance bond guarantees project completion but doesn’t add cash to the business. A trust account is intended for handling client funds or regulatory requirements, not as a liquidity facility for contractor operations. A credit card can help for small, occasional expenses but typically has lower limits and higher ongoing costs, making it less suitable for the large, ongoing expenditures of a construction project.