US Road & Highway Construction Industry Outlook (2025–2030)

Highway interchange construction with city skyline in the background.

Industry Overview

The US road and highway construction industry consists of companies that build and repair roads, highways, streets, and related infrastructure (e.g. airport runways, parking lots, lighting, and signage). This industry is a large segment of the construction sector, with total annual revenue reaching about $193.4 billion in 2025. Industry activity has grown in recent years, driven by increased government infrastructure spending. Over 2019–2024, industry revenue expanded at a 3.0% compound annual growth rate (CAGR), reflecting steady growth supported by public investment. In 2025 alone, revenue is expected to grow roughly 2.9% to reach the $193.4 billion level. Profit margins tend to be slim but stable in this field, as rising costs are often offset by consistent demand.

The market structure is highly fragmented, with no single firm controlling over 5% of market share. Thousands of contractors—ranging from large engineering/construction firms to small local paving companies—compete for projects. Leading companies in road construction include major heavy civil contractors such as Granite Construction, Kiewit, and Fluor, among others, but even these do not dominate nationally. Most firms operate regionally, and competition is often based on price and the ability to offer a full range of services (e.g. grading, paving, bridge work). The industry’s geographic distribution follows population and development patterns; for instance, the Southeast United States (home to about a quarter of the U.S. population) has a high concentration of road contractors and projects.

Market Trends and Drivers (2025)

Robust public funding has been the primary engine of growth for highway construction. Federal, state, and local government budgets for transportation infrastructure have surged in recent years. Notably, the Infrastructure Investment and Jobs Act (IIJA) of 2021 – also known as the Bipartisan Infrastructure Law – is injecting $350 billion in federal funding for highways over 2022–2026. This infusion, largely distributed to states, ensures a pipeline of projects for contractors and has buoyed industry activity despite broader economic fluctuations. State and local governments have also maintained healthy highway spending, often leveraging federal grants and their own gas-tax revenues. As a result, construction firms have enjoyed a strong backlog of road work through the mid-2020s.

However, rising costs and supply challenges are significant trends tempering the boom. Global inflation and tariffs have driven up prices for key inputs like steel, asphalt, cement, and fuel. For example, import tariffs on steel have inflated the cost of rebar and other structural materials, squeezing project budgets. Sharp price increases for asphalt, lumber, and machinery (partly due to pandemic-related supply chain disruptions and general inflation) have led to cost overruns on many projects. A 2024 U.S. Department of Transportation report warned that up to 40% of the remaining federal highway funds from the infrastructure bill could be eroded by inflation’s impact on materials and labor. Contractors are operating with tight profit margins, as they often locked in bid prices before the inflation surge and must absorb higher expenses. In response, firms are seeking escalation clauses in contracts and more efficient construction methods to control costs.

Another key challenge is the skilled labor shortage in construction. The industry workforce is aging and not growing fast enough to meet demand. The Associated Builders and Contractors (ABC) estimate that the U.S. construction sector needs to attract 439,000 net new workers in 2025 to meet anticipated project demand, and nearly 500,000 more in 2026 as infrastructure spending peaks. If the workforce doesn’t expand accordingly, labor costs will rise further and projects could face delays. Many road builders report difficulty hiring qualified equipment operators, truck drivers, and laborers. In states experiencing a surge of highway, manufacturing, and data-center projects, contractors are competing for the same pool of skilled trades, exacerbating shortages. This labor crunch is prompting higher wages (construction wages were up ~4.4% year-on-year as of early 2025) and greater investment in workforce development. Contractors and trade groups are also adopting new technologies (like automation, robotics, and project management software) to improve productivity with fewer workers.

On the positive side, technological and environmental trends are creating new opportunities. There is growing use of advanced project management tools, drones for surveying, and AI for optimizing construction schedules. Sustainable construction practices are on the rise – for example, recycling asphalt pavement, using low-carbon concrete, and integrating “smart highway” technologies (sensors, EV charging infrastructure, etc.) are becoming more common. Some road builders are investing in green equipment and methods, aligning with government priorities to reduce emissions. For instance, firms like Vermont Roadworks in New England have adopted asphalt recycling and bio-based equipment cleaners to improve sustainability in road maintenance. These innovations not only help meet environmental regulations but can also lower long-term costs and position contractors for new types of projects (such as smart roads or renewable energy-linked infrastructure).

Projected Industry Outlook (2025–2030)

Looking ahead, the outlook for the road and highway construction industry from 2025 through 2030 is cautiously optimistic, with moderate growth expected. Industry revenue is projected to continue rising over the next five years as government funding remains strong and aging infrastructure demands attention. Even after the current IIJA funds are spent by 2026, the nation’s needs will be far from fully met. The American Society of Civil Engineers (ASCE), in its 2025 Report Card, again graded U.S. roads a dismal “D+”, indicating poor condition overall. ASCE estimates there is a $684 billion funding gap for roads over the coming 10 years (2025–2035) under current investment levels. This gap implies substantial additional spending will be required just to bring road infrastructure to a state of good repair. Policies or funding programs aimed at closing this gap – such as new federal highway bills, increased gas taxes or mileage fees, and state/local bond initiatives – would directly benefit the road construction industry by generating more projects.

At the federal level, a key uncertainty is the future of the Highway Trust Fund after 2026. The IIJA boosted funding through FY2026, but absent new legislation the Trust Fund faces insolvency by ~2028 due to insufficient gas-tax revenue. It is widely expected that Congress will enact a new surface transportation funding bill by 2026 to reauthorize and possibly expand spending through 2030 and beyond. The Congressional Budget Office has noted that an extra $40 billion per year may be needed to sustain and grow federal highway programs given the Trust Fund shortfalls. If lawmakers address this (through general funds, higher fuel taxes, or other mechanisms), federal investment in roads should remain robust into the late 2020s. Conversely, delays or austerity in infrastructure funding could slow industry growth in the second half of the decade. Political changes also introduce some risk: for example, shifts in federal priorities or administrative actions could alter the pace at which authorized funds are released. (Notably, industry analysts in 2025 observed potential moves to pause or reassess certain IIJA projects under new administration policies, though the long-term impact remains uncertain.) Overall, assuming continued bipartisan support for infrastructure, the baseline forecast sees steady demand through 2030, with annual industry growth in the low single digits (perhaps on the order of 2–4% per year). This would put industry revenues somewhere in the mid-$200 billion range by 2030.

Several factors will shape the exact growth trajectory:

• Urgent Rehabilitation Needs: Many highways, bridges, and surface roads are reaching the end of their design life, requiring reconstruction. By 2030, a wave of projects to rebuild aging interstates, upgrade outdated urban freeways, and improve rural roads is expected. If additional funding is allocated to tackle these needs, it could accelerate industry growth. For example, significant programs to fix structurally deficient bridges or expand highway capacity in high-congestion corridors would increase demand for contractors.

• Municipal and State Initiatives: Beyond federal money, numerous states have passed their own transportation funding measures (e.g. increased fuel taxes, tolls, or bonds). These initiatives will continue supplementing federal programs. Regions with fast population growth (Sun Belt states like Texas, Florida, Georgia, etc.) are projected to invest heavily in new highways and urban loop roads through 2030, creating regional hotspots of construction activity. Conversely, states facing budget strains may scale back, so growth will not be uniform nationwide.

• Economic Conditions: Macroeconomic trends—interest rates, inflation, and general economic growth—will influence the industry. High interest rates can deter infrastructure investment by raising borrowing costs for government bonds and increasing contractors’ financing costs. If inflation persists, real growth could be weaker even if nominal spending rises (as seen with the IIJA funds being partially absorbed by higher prices). On the other hand, if inflation moderates and borrowing costs come down by 2026–2027 (as some forecasts expect), it could stimulate more projects (cheaper financing for public works and private development around infrastructure). The industry historically also gets a boost from stimulus measures in economic downturns – any future recession might prompt additional federal infrastructure stimulus, as was done in the past, which would bolster the construction outlook.

• Technological Change and Efficiency: Adoption of more efficient construction technologies (prefabrication, automation of grading/paving, project management AI) could improve productivity. This means contractors might complete projects faster or with fewer workers, slightly mitigating labor shortages. While this doesn’t directly increase demand, it allows the industry to deliver more with the available funding – effectively raising capacity. Also, new types of infrastructure (like smart highways, electric vehicle charging corridors, and climate-resilient road designs) could emerge as niche growth areas within the industry by the late 2020s, supported by public policy trends.

In summary, through 2030 the U.S. road and highway construction industry is expected to experience steady growth, underpinned by ongoing public investment to address deteriorating infrastructure. Market analysts project the industry to remain in a mid-life cycle phase – not a rapid boom, but growing in line with broader economic and population needs. Barring unforeseen budget cuts, contractors can anticipate a reliable volume of highway and roadwork projects. The main risks to the outlook are funding shortfalls (e.g. if the Highway Trust Fund issues aren’t resolved) and cost pressures that could make some projects less “financially feasible” for governments to undertake. Nonetheless, given the acknowledged infrastructure gap and bipartisan support for transportation, the demand for road construction is likely to remain strong through 2030, providing a favorable environment for firms that can navigate the cost and labor challenges.

Key Industry Players

Unlike some industries with a few dominant firms, road & highway construction is characterized by many competitors and a decentralized competitive landscape. According to IBISWorld, no single company accounts for more than 5% of total industry revenue. Instead, the field is populated by a mix of large general contractors, midsize regional firms, and numerous small specialty contractors (e.g. paving specialists, grading and earthmoving subcontractors).

That said, several large construction and engineering companies are consistently among the top performers in the highway sector. Granite Construction Inc. was ranked the #1 highway contractor in 2024 by Engineering News-Record, reflecting its focus on road and transportation projects. Kiewit Corporation, a major design-build contractor, frequently leads in overall transportation construction revenue (including roads, bridges, transit) and has a significant presence in highway megaprojects. Other notable firms include Bechtel, Fluor, The Walsh Group, Skanska USA, VINCI (through its U.S. subsidiaries), Lane Construction (Webuild), Jacobs (which primarily provides engineering/design and program management for large projects), and AECOM (engineering and project management). Many of these large firms undertake multimillion- or billion-dollar projects such as interstate expansions or major highway interchanges, often as part of joint ventures.

Besides these national players, regional contractors hold significant market share in their areas. For example, companies like Allan Myers in the Mid-Atlantic, Austin Bridge & Road in Texas, or Peter Kiewit Sons’ (Kiewit’s regional operations) play major roles in state DOT projects. Additionally, specialty contractors handle segments of highway work: paving companies (e.g. Vulcan Materials for asphalt paving, which is also a materials supplier), bridge construction specialists, traffic control and striping companies, etc. These niche players often subcontract under the primary highway contractors.

Given the industry’s fragmentation, competition is often bid-driven. Contracts (especially public projects) are typically awarded through competitive bidding, so the ability to offer a lower cost while meeting technical specs is key. Profit margins are modest – often in mid-single digits – so efficient operations and accurate cost estimation distinguish successful firms. In recent years, contractors who can handle a “design-build” approach or manage large turnkey projects have had an edge in winning big highway jobs, as many public agencies are packaging projects to include design, construction, and sometimes maintenance.

The industry also sees participation from disadvantaged business enterprises (DBEs) and smaller contractors through set-aside programs. Federal highway-funded projects typically have DBE participation goals, which means larger contractors often partner with or subcontract to minority-owned, woman-owned, and small local businesses for portions of work (e.g. trucking, guardrail installation, landscaping). This has allowed many small firms to establish themselves in the highway construction arena. For example, Sierra Traffic Service, a woman-owned small business in California, grew by providing traffic control services (lane closures, flagging, etc.) on road construction projects. Over two decades, Sierra Traffic expanded and in 2023 used an SBA loan to purchase its own truck yard and office facility, positioning it for further growth supporting highway contractors. This illustrates how smaller niche players carve out roles and can scale up with the help of small-business financing (more on financing in the next sections).

Overall, the key players in road construction range from giant firms tackling mega-projects to family-owned contractors paving local roads. The absence of any dominant corporation means the industry remains highly competitive. Companies differentiate themselves through experience, project management capability, relationships with public agencies, and the capacity to deliver quality work on time and on budget. As infrastructure spending continues, there may be opportunities for consolidation or growth of mid-sized firms into larger contenders, but given the sheer scope of work and geographic dispersion, a diverse mix of players will likely persist through 2030.

Regulatory and Policy Factors

The road and highway construction industry is heavily influenced by government policy and regulation, since the majority of funding comes from public sources. Several key regulatory and policy factors affect industry conditions and outlook:

• Federal Funding Programs: The U.S. federal government plays a central role through legislation and funding streams. The Highway Trust Fund (HTF), funded mainly by federal gasoline and diesel taxes, is the primary source for highway grants to states. Periodic surface transportation acts (like the current IIJA/Bipartisan Infrastructure Law for 2022–2026) authorize spending from the HTF. The stability and size of these acts are critical – when Congress passes a long-term, well-funded bill, the industry sees a predictable project pipeline. Conversely, uncertainties around reauthorization (like potential HTF insolvency by 2028 without new revenue) create risk. As of 2025, the IIJA has significantly increased federal outlays to roads, but how funding levels will look from 2027–2030 depends on future legislation. The Highway Trust Fund’s structural deficit (fuel tax revenues no longer cover spending) will likely force policy changes – possibly raising fuel taxes, introducing new fees (such as per-mile road user charges or tapping general funds). Contractors are watching these debates closely, as outcomes will directly impact long-term workload.

• State and Local Funding & Regulations: State governments set their own transportation budgets, often funded by state fuel taxes, vehicle registration fees, tolls, and bonds. Many states have raised gas taxes in recent years or approved infrastructure bonds to supplement federal money. Additionally, local government policies (like metropolitan sales taxes for transportation or impact fees on developers) contribute to road project funding. Regulations on how funds can be used (e.g. some states have “Fix-It-First” policies emphasizing maintenance over new construction, or laws requiring voter approval for big projects) also guide the type of work available. Buy America(n) provisions are another regulatory aspect – federal law often requires that materials (steel, iron, manufactured products) used in highway projects be sourced domestically. This can benefit U.S. suppliers but also sometimes raises material costs or causes procurement delays if domestic supply is tight. Contractors must navigate these rules in bidding and sourcing materials.

• Environmental and Planning Regulations: Road builders operate under environmental regulations like the National Environmental Policy Act (NEPA), which mandates environmental impact assessments for major projects. Obtaining environmental clearance and permits (for wetlands, endangered species, air quality, etc.) can significantly affect project timelines. Stricter environmental rules or lengthy review processes can delay projects and increase costs (mitigation measures, design adjustments). In recent years, there have been efforts to streamline permitting for infrastructure (e.g. “One Federal Decision” policy aimed at completing NEPA reviews within 2 years), but environmental compliance remains a major factor. Additionally, states have their own environmental and zoning laws that can affect road construction (for example, California’s CEQA process). By 2030, we may see evolving regulations related to climate resilience – e.g., requirements for roads to be built to withstand extreme weather or sea-level rise, which could alter design standards and materials used.

• Labor Regulations and Policies: Labor laws, prevailing wage requirements, and workforce policies also play a role. Public works projects often require paying prevailing wages (per the Davis-Bacon Act for federal-aid projects), which ensures good pay for workers but adds to project labor costs. Policies promoting union labor or apprenticeship utilization on jobs can influence which contractors bid (union vs. non-union shops) and their cost structure. Conversely, some states have loosened labor rules (e.g. repealing state prevailing wage laws) aiming to reduce costs – these policy swings can impact bid prices and competition. By the late 2020s, a push for more skilled trade training programs and possibly immigration reform (to allow more construction workers) could alleviate labor shortages if enacted, affecting the labor market for highway construction.

• Tariffs and Trade Policy: Federal trade policies, such as tariffs on imported construction materials, directly affect input costs. A recent example is the 25% tariff on imported steel which makes rebar and steel beams more expensive. With domestic steel production not fully meeting demand, highway contractors have faced higher prices and sometimes delays obtaining materials, as noted earlier. Trade policies on lumber, aluminum, machinery, and petroleum products (affecting asphalt) similarly trickle down to project costs. If tariffs remain or new ones arise, contractors must budget for potentially higher costs. Policy changes that remove or reduce tariffs could relieve some cost pressure.

• Safety and Traffic Regulations: There are also regulatory standards ensuring construction zone safety and quality. The Federal Highway Administration (FHWA) sets guidelines for work zone safety, traffic control plans, and design standards (e.g., guardrail specifications, pavement thickness standards). Compliance with these standards is mandatory and can influence project methods and costs (e.g., needing specific safety equipment, certified personnel for traffic control, etc.). Additionally, the push for improved work zone safety may lead to regulations requiring more automated safety solutions (like automatic flagger devices, intrusion alarms) by 2030, which contractors would need to implement.

In summary, government actions in funding and regulation form the environmental and policy backbone of the road construction industry. Strong funding programs (IIJA and successors) are a positive driver, whereas factors like tariffs and stringent regulatory compliance can pose challenges. The industry generally benefits from stable, long-term policy commitments to infrastructure. Conversely, political gridlock or sudden policy shifts (such as funding cuts or restrictive regulations) are key risks. As of 2025, the policy climate is supportive – significant federal dollars are in play and there’s recognition of infrastructure needs – but careful attention will be needed through 2030 to issues like the Highway Trust Fund fix, inflation impacts, and fostering a sufficient workforce via supportive policies.

SBA Loan Programs for Road & Highway Construction Businesses

A vital aspect of the road construction industry’s outlook is how small and mid-sized contractors finance their growth and projects. The U.S. Small Business Administration (SBA) offers several loan programs that are highly relevant to road and highway construction businesses, especially for supporting property acquisition, equipment purchase, renovation, and business expansion needs. Below, we detail the key SBA financing options, how they apply to this industry, and additional SBA support programs. We also provide examples of how developers (contractors) and lenders utilize these programs for infrastructure-related projects.

SBA 7(a) Loans for Contractors and Developers

The SBA 7(a) loan program is the SBA’s flagship loan guaranty program, used widely by small businesses across industries. For construction firms (including road and highway contractors), 7(a) loans are attractive due to their flexibility in use of proceeds. SBA 7(a) loans can provide up to $5 million (typical maximum) in financing, guaranteed by the SBA, which participating banks or lenders extend to the business. Key ways a road/highway construction company might use a 7(a) loan include:

• Equipment Purchases: Heavy machinery like excavators, asphalt pavers, graders, dump trucks, etc., is essential for road construction but very expensive. A 7(a) loan can finance construction equipment with loan terms up to 10 years. For example, a contractor could use a 7(a) loan to buy a new asphalt milling machine or a fleet of concrete mixers, spreading the cost over a decade. This enables companies to take on larger projects without the burden of huge upfront equipment costs.

• Commercial Real Estate – Offices/Yards: While road builders primarily work on external sites, they often need a headquarters, maintenance yard, or materials plant. SBA 7(a) loans can fund the purchase or construction of owner-occupied commercial real estate, such as a new office, garage or equipment yard for the business, with repayment terms up to 25 years. For instance, if a paving company wants to construct a larger garage and workshop on owned land, a 7(a) loan could finance that construction or renovation, allowing long-term amortization of the cost.

• Working Capital: Road construction projects typically involve significant upfront costs (materials, labor) and slow, phased payments. The 7(a) program allows loans for working capital to cover operational expenses – from purchasing construction materials to covering payroll and fuel costs while awaiting project payments. This is critical for small contractors who might otherwise face cash flow crunches on large jobs. SBA 7(a) funds can effectively bridge the timing gap between paying project expenses and receiving progress payments from clients.

• Business Acquisition or Expansion: Some companies grow by acquiring competitors or related businesses (e.g. a grading contractor acquiring a traffic control company to offer more services). A 7(a) loan can be used to buy an existing business or buy out a partner. In road construction, this might mean acquiring another firm to gain its equipment and contracts. The 7(a) program’s flexibility extends to these scenarios, as long as the acquired entity will continue operating and meet SBA small business criteria.

In practice, SBA 7(a) loans have been used by many contractors to expand capacity. For example, a case study described an experienced contractor in Texas who obtained a $300,000 SBA 7(a) loan to purchase new equipment, hire additional skilled workers, and take on larger projects. With the loan’s support, the business was able to grow and meet rising demand for construction services. This illustrates how 7(a) financing can empower a small construction firm to scale up operations.

Specialized 7(a) Programs for Construction: Within 7(a), the SBA also offers tailored financing programs that can benefit road builders. One is SBA CAPLines, which are revolving lines of credit under the 7(a) umbrella. Specifically, the Contractor’s CAPLine program is designed for contractors needing funds to execute specific contracts. A road contractor who wins a highway job could use a Contractor’s CAPLine to finance the direct costs of that project (materials, labor, subcontractors) and then repay as the contract pays out. Similarly, the Builders CAPLine can finance the construction or renovation of commercial or residential buildings for resale (though roads per se are not “buildings,” a contractor doing a small development project that includes roads might use it). These CAPLine programs recognize the cyclic cash flow in construction and provide short-term capital that aligns with project milestones.

Another support under 7(a) is the SBA Express loan, which can expedite smaller loans (up to $500,000) with a 50% SBA guarantee. Construction firms sometimes use SBA Express for quicker access to funds, for example to buy a needed piece of equipment or small property when timing is critical. The streamlined processing can be useful in the fast-moving bid environment of contracting, although for larger needs the standard 7(a) is used due to its higher guarantee (up to 85% on loans ≤$150k and 75% on larger loans).

For lenders, the 7(a) guaranty (75–85% of principal) significantly reduces their risk, encouraging banks to lend to contractors who might have fluctuating income or higher risk profiles. Many banks actively participate in SBA lending for construction companies. In fact, some lenders specialize in SBA loans for contractors, understanding the industry’s dynamics. The SBA reports that numerous community banks, national banks, and credit unions partner in the 7(a) program, making it widely accessible. The guarantee also allows longer terms and lower down payments than many conventional bank loans, which is crucial for contractors balancing multiple equipment loans and credit lines.

SBA 504 Loans for Property, Plant, and Equipment

The SBA 504 loan program is another major financing tool, particularly suited for road construction businesses looking to acquire property or large equipment, or to undertake major renovations and development. An SBA 504 loan is typically used for fixed assets – it provides long-term, fixed-rate financing for purchasing or improving real estate and heavy equipment, with the goal of promoting business growth and job creation. Unlike 7(a), which is a single loan, a 504 financing deal is structured as a partnership between a private lender and a nonprofit Certified Development Company (CDC), with the SBA guaranteeing the CDC’s portion. The structure usually entails 50% of the project cost from a bank, 40% from the CDC (via an SBA-guaranteed debenture), and 10% as borrower equity. This 10% down payment requirement is a key benefit, allowing contractors to preserve cash.

Uses in the road & highway construction industry:

• Land and Facility Acquisition: Many growing contractors reach a stage where owning their facilities makes more sense than leasing. SBA 504 loans enable companies to buy land and construct new facilities or purchase existing buildings for their operations. For example, a highway contractor might purchase a larger equipment yard with an on-site maintenance garage or an office building for project management staff. The 504 loan can cover land acquisition, ground-up construction costs, site improvements, and even landscaping as part of an overall project. The long 25-year term and fixed interest rates make mortgage payments affordable, often comparable to or less than what the business paid in rent. Owner-occupancy is required – at least 51% of an existing building, or 60% of a newly built facility, must be occupied by the borrower’s business – which fits most contractors who use the space for their own operations.

• Plant and Yard Development: Some road construction firms have capital-intensive facilities like asphalt production plants, quarries, or fabrication shops for precast concrete. SBA 504 financing can support building or expanding these facilities (provided the business using them is small by SBA standards). For instance, if a paving company (small business) wants to build its own asphalt batch plant to supply its projects, a 504 loan could finance the plant equipment and structures as they are part of the fixed asset project. Owning such assets can give contractors a cost advantage and new revenue streams (selling materials commercially), and the SBA encourages this kind of expansion by spreading the cost over 20-25 years at fixed rates.

• Heavy Equipment Purchases: Uniquely, the 504 program also covers “long-life” heavy equipment purchases, even without real estate involved. This is particularly relevant for highway contractors needing big-ticket machinery. Items like large cranes, asphalt pavers, milling machines, or earthmovers can cost hundreds of thousands each. Through 504 loans, a contractor could finance, say, a $1 million concrete paving machine with only $100k down, the CDC/SBA funding $400k, and a bank lending $500k. The loan term for equipment is typically 10 years (since equipment has a shorter useful life than real estate, although some 504 lenders offer 10-15 year terms for equipment). Still, that is a longer term than most conventional equipment loans, yielding a lower monthly payment. The 504’s fixed interest rate is also valuable for equipment financing, protecting the borrower from rate fluctuations.

• Renovations and Development Projects: If a construction business already owns a property that needs expansion or modernization (for example, adding a new warehouse on the contractor’s yard, or upgrading an office with new technology and energy-efficient features), those construction costs can be rolled into a 504 loan. Essentially, 504 can act as a construction loan for the business’s own facilities. Many road contractors take advantage of this when they outgrow an old yard or need to add garages for new equipment. The SBA even has provisions encouraging projects that meet public policy goals, such as energy efficiency or renewable energy—relevant if a contractor’s development includes green building elements (though that’s more of a niche benefit).

Benefits for developers and lenders: From the borrower’s perspective (the contractor/developer), the SBA 504 provides affordable, long-term capital. The low down payment (10%) preserves precious cash that small contractors can use for working capital or to bid more projects. The fixed interest rates (often below market) and 20-25 year terms on the CDC portion mean predictable costs and lower debt service, which is crucial in an industry with income volatility. Borrowers also build equity in real assets over time, strengthening their balance sheets. For example, Terry Quinones, the owner of Sierra Traffic Service (a traffic control subcontractor in California), leveraged an SBA 504 loan to purchase her company’s first permanent yard and office after years of renting. The loan allowed her to buy an acre+ property with a secure fenced lot for her trucks, fulfilling a longtime goal of ownership. By locking in a fixed-rate mortgage, her business gains stability against rent hikes and has an appreciating asset. This kind of story is common—contractors using 504 loans to move from leased space to owned facilities.

For lenders, 504 loans are attractive because the risk is shared: the bank only lends 50% of the project cost (with a first lien on collateral), while the SBA-guaranteed debenture takes the second lien. The SBA guarantee on the CDC’s 40% portion means that part is largely de-risked from the borrower’s standpoint. Banks often like 504 deals because their loan-to-value is only 50%, making it very secure, and they know the SBA/CDC piece is in place to complete the financing. Many banks partner closely with CDCs to finance construction businesses—some leading SBA 504 lenders (like Wells Fargo, JPMorgan Chase, and various regional banks) have dedicated staff for 504 lending. The Certified Development Companies themselves (nonprofit entities certified by SBA to administer the 504 program) are essentially specialized lenders focusing on economic development. For instance, CDC Small Business Finance (which served Sierra Traffic Service) is one of the largest CDCs, active in financing real estate for contractors and other businesses in several states. There are CDCs in every state, often with a mission to support local small manufacturers, contractors, and service businesses in obtaining their own facilities.

Feasibility Studies and SBA Loan Requirements for Construction Projects

When road construction firms pursue SBA loans—especially for major projects like building a new facility or starting a significant development—there is often a requirement to demonstrate that the project is viable. Both SBA 7(a) and 504 loans may require a feasibility study for certain deals, particularly new construction, expansions, or start-up ventures in the construction and development realm. A feasibility study is essentially a comprehensive analysis that evaluates the project’s potential for success and the business’s ability to repay the loan. It gives lenders and the SBA added confidence that the project makes economic sense.

When and why are feasibility studies needed? According to SBA guidelines, a feasibility study can be required at the lender’s or SBA’s discretion for loans involving new or speculative projects. Common triggers in construction include: ground-up construction of a facility for a new business operation, large-scale expansions that represent a significant change or addition to the business, or specialized projects (like building a facility for an entirely new service line). For example, if a small road contractor wanted an SBA loan to build an asphalt recycling plant – a relatively large, technical project outside their core paving business – the SBA or lender might ask for a feasibility study to validate market demand, costs, and profitability of that new venture. Essentially, whenever there’s more uncertainty or project complexity, a third-party feasibility analysis helps assess risk.

Contents of a feasibility study: An SBA-compliant feasibility study typically includes several key components to cover all aspects of the project’s viability:

• Executive Summary: Overview of the project or business expansion and the conclusions (e.g. “This study finds that establishing an asphalt plant in XYZ County is feasible, given demand projections, financial returns, etc.”).

• Economic and Market Analysis: A review of the industry and market conditions for the project. For a construction/development project, this might examine local infrastructure spending trends, competition (e.g. how many other contractors or plants serve the area), and demand (such as how much road construction is projected in the region that would require the company’s new service). It should demonstrate there is sufficient market opportunity for the project to succeed.

• Technical Feasibility: An evaluation of the technical requirements and operational plans. In construction, this could include site analysis (is the location suitable for the planned facility?), availability of utilities or raw materials, the construction plan and timeline itself, and any technical challenges (for instance, environmental or permitting hurdles for the development). It essentially asks: can the project be built and operated with the intended resources and technology?

• Management/Organizational Feasibility: SBA wants to know the company has the capacity to execute the project. The study will review the management team’s qualifications and experience. For a contractor, this might highlight past successful projects, the experience of key personnel in running a plant or larger operation, etc. It might also cover staffing plans for the new venture.

• Financial Feasibility: A thorough financial projection is critical. This includes pro-forma financial statements (projected income statements, balance sheets, cash flows), usually looking ahead 5 to 10 years for long-term projects. It also involves analyzing profitability (e.g. using Net Present Value or Discounted Cash Flow analysis on the project’s cash flows), as well as key financial ratios (debt service coverage, return on investment, break-even point). The goal is to show that the project can generate sufficient revenue and profit to repay the loan and be sustainable. For example, if a contractor is adding a new service line, the study would forecast how much revenue that new service will bring in annually and when it will cover its costs. Often, scenarios (best case, worst case) are analyzed to demonstrate robustness.

The feasibility study basically provides an objective, third-party validation (if done by an independent consultant) that the loan is backing a sound project. A well-prepared study is important for loan approval. SBA lenders often require it as part of the application package for construction loans above a certain size or complexity. In fact, one SBA 504 lender’s checklist explicitly notes: for larger or more complex construction projects, a feasibility study may be required to demonstrate the project’s viability, market demand, and potential return on investment. This ensures due diligence that the project will not falter mid-way or fail to generate income, which would jeopardize loan repayment.

For instance, consider a small developer seeking a 504 loan to build a new 100-room hotel near a highway exit (not exactly road construction, but a development project). Because it’s a start-up venture in hospitality, the SBA would certainly require a feasibility study addressing local market demand for the hotel, projected occupancy rates, competition, etc., to justify the project. Similarly, if a road contractor wanted to use a 7(a) loan to develop a gravel quarry to vertically integrate their supply chain, a feasibility report would need to confirm there’s enough demand for aggregate in the area and that the venture would be profitable.

SBA does not provide a specific template, but professional firms specialize in SBA feasibility studies to ensure all required elements are covered. These studies often follow SBA’s Standard Operating Procedure guidelines (SOP 50-10) which mention the need for such analysis. They serve as a decision-making tool for both the lender and borrower – sometimes a feasibility study might even conclude a project is not as strong as thought, saving the borrower from a risky endeavor.

In summary, feasibility studies are an important part of SBA-backed construction and development projects, acting as a reality check and planning tool. Construction business owners should be prepared to invest the time (and cost) in a thorough study for major projects; doing so not only helps secure financing but also increases the likelihood of the project’s success by identifying challenges early. The study’s comprehensive nature – covering market, technical, management, and financial aspects – aligns well with the construction industry’s need to carefully plan large capital projects.

SBA Support for Project Financing and Risk Management

Beyond the primary loan programs, the SBA provides additional financial tools that support road construction contractors, particularly in executing public infrastructure projects:

• SBA Surety Bond Guarantee Program: In the realm of public road construction, securing surety bonds is often a prerequisite for contractors. Government agencies typically require bid bonds, performance bonds, and payment bonds on construction contracts to ensure the project will be completed and subcontractors/suppliers paid. Many small contractors struggle to obtain bonds because of strict underwriting by surety companies (they assess the contractor’s financial strength, experience, and capacity). The SBA’s Surety Bond Guarantee (SBG) program helps by guaranteeing a portion of the bond (up to 80-90% of the bond's value) for qualified small businesses, thus encouraging sureties to issue bonds to those businesses that might not meet normal criteria. The program can guarantee bonds for contracts up to $6.5 million (and up to $10 million for federal contracts), and recent updates have even raised these limits (the SBA notes guarantees up to $10 million in many cases).

  For example, if a small highway contractor wins a $5 million state road job but lacks the balance sheet or track record that a surety company typically wants, the contractor can apply for an SBA bond guarantee. The SBA will work with authorized surety agencies to provide a guarantee – essentially promising to reimburse a percentage of losses to the surety if the contractor defaults. With that backing, the surety issues the required bonds to the contractor. This allows the small business to take on larger public projects than it otherwise could, opening opportunities in public infrastructure construction that might be closed off due to bonding limits. The SBA charges a small fee (currently 0.6% of the contract price for performance and payment bonds) for this guarantee, but it can be a worthwhile cost for accessing big contracts. The SBG program has been instrumental for many minority-owned and emerging highway contractors to grow – it essentially acts as a credit enhancer to meet government contracting requirements.

• Working Capital Lines and Microloans: In addition to the 7(a) standard loans and CAPLines mentioned, the SBA also offers Microloans (up to $50,000) through nonprofit intermediaries. While not large enough for equipment purchases, microloans can help very small subcontractors (e.g., a traffic control firm or a striping company) with short-term needs like buying supplies or small tools, or as startup capital to get the business going. For slightly larger working capital needs, some contractors might use SBA Express lines of credit for quick access to funds during the project. Additionally, the SBA has recently promoted fintech partnerships for quicker working capital loans under 7(a) (the SBA Community Advantage program can also target contractors in underserved markets). All these are part of the financing ecosystem enabling contractors to finance payroll, materials, and overhead while executing infrastructure jobs.

• 504 Loan Refinancing and Expansion Support: The SBA 504 program not only finances new acquisitions but can also refinance existing debt. In 2021, SBA made permanent a program to refinance commercial mortgages and other business debt with 504 loans. So a contractor who built a facility years ago with a conventional loan might refinance it with a 504 to get a better rate or pull cash out for expansion (there are rules for cash-out for expansion). This can free up capital for development. Furthermore, the SBA has provisions for larger 504 loans (up to $5.5 million SBA share) for manufacturers and energy projects, which could apply if a road materials manufacturing operation (like a small asphalt or concrete products plant) is part of the business.

In essence, SBA-backed funding options cover both the long-term capital expenditures (via 7(a) and 504 loans for property, plant, equipment) and the short-term operational needs and risk management (via CAPLines, microloans, and surety bond guarantees) for small businesses in road construction. This combined support enables developers/contractors to not only secure the assets they need to grow but also to confidently bid on and perform public infrastructure projects that might otherwise be beyond their reach due to bonding or working capital constraints.

Examples of SBA-Financed Projects and Participants

To illustrate how these programs come together in practice, here are a few profiles and examples of active developers (contractors) and lenders leveraging SBA support in the road and infrastructure construction arena:

• Sierra Traffic Service – Traffic Control Contractor (California): As mentioned earlier, Sierra Traffic Service is a woman-owned small business providing traffic control for road construction (supplying flaggers, setting up lane closure signage, etc.). After two decades of renting yard space, owner Terry Quinones wanted to purchase a permanent facility. In 2023, she obtained an SBA 504 loan through CDC Small Business Finance and a bank partner, which enabled her to buy a 1+ acre fenced yard and office building in Camarillo, CA. This property purchase allowed Sierra Traffic to secure and expand its fleet of trucks and equipment used on highway jobs. The deal is a success story frequently cited by the CDC: “Thanks to an SBA 504 loan, she has her beautiful truck yard and office space…”. The lender (a CDC and bank) was willing to finance 90% of the property cost, seeing the company’s solid track record with public contracts and the SBA guaranty on the 40% CDC portion. Now Sierra Traffic has greater capacity and stability to serve major highway contractors, demonstrating how SBA financing grows the supply chain of infrastructure projects.

• Vermont Roadworks – Paving Contractor (Vermont): Vermont Roadworks is a small paving and roadwork business that started with minimal equipment and grew over 10 years to about 10–20 employees, handling projects across Vermont and New Hampshire. As they expanded, they needed more machinery and working capital. The company was recognized as Vermont’s SBA Woman-Owned Business of the Year in 2022, a sign that they likely utilized SBA assistance. While specific loan details aren’t public, it’s common for such firms to have used an SBA 7(a) loan or line to finance equipment like pavers and rollers, or to acquire a competitor (indeed Vermont Roadworks acquired another asphalt services company in 2022 to broaden its services ). By partnering with SBA-approved lenders, the owners Tara and Fred Cheney navigated growth challenges – from buying trucks to planning for an asphalt recycler purchase – showing how SBA-backed capital can underpin expansion in a capital-intensive business. The SBA award and recognition also suggest they received guidance from SBA programs or the Small Business Development Center, which often go hand-in-hand with financing.

• General Contractor Expansion – Case Example: A financing company, LVRG, shared a scenario of “Mike D., a general contractor in Texas,” who landed a large $15 million highway-adjacent commercial project but needed more equipment and working capital to execute it. The solution was a $4.2 million financing package combining SBA loans for new Caterpillar equipment and additional working capital. While the details are anonymized, this reflects a real-world pattern: the contractor likely used an SBA 7(a) loan for the equipment portion (since 7(a) can go up to $5M and cover mixed uses) and perhaps a CAPLine or another tranche for working capital. The ability to bundle financing in this way, with the SBA guaranteeing the loan, enabled the contractor to take on the project and complete it successfully. The lender (possibly a specialized SBA lending bank or finance firm) mitigated risk through the SBA guaranty and by structuring the deal across needs, illustrating creative use of SBA programs to support public infrastructure-related work.

• Lenders’ Role – CDCs and Banks: On the lending side, Certified Development Companies (CDCs) and SBA-participating banks are key players. For example, CDC Small Business Finance, which helped Sierra Traffic, is very active in California and adjacent states, financing many construction-related businesses. Another example is Growth Capital Corp or Michigan Certified Development Corporation, which highlight cases of SBA 504 loans used in construction and real estate development. Many banks also tout their involvement: major banks like Wells Fargo and U.S. Bank have been top SBA 7(a) lenders and often finance contractors for equipment and expansion. There are also niche lenders that focus on construction – they understand contractors’ unique cash cycles and collateral (e.g., heavy equipment values). These lenders often use SBA programs to extend credit that might be too risky otherwise.

  The American Bankers Association has noted success stories such as a women-owned highway construction company that got started with the help of an SBA loan and grew substantially, as shared in testimony to lawmakers. While the company name wasn’t disclosed, it exemplified how a bank’s SBA-backed loan enabled a startup contractor to invest in equipment and bonding, eventually creating jobs in the community. Lenders value these outcomes as they fulfill community lending goals and earn SBA guarantees, which protect them in case of default.

• Public-Private Partnership Developers (Small-Scale): Large public-private partnerships (P3s) for highways (like toll road concessions) are usually beyond the scope of SBA (given the companies are often large consortiums). However, on smaller scales, there are cases like local toll bridge projects or municipal infrastructure developments where a small business might take the lead. An example could be a small developer securing an SBA loan to build a privately-owned access road or industrial park roads with an agreement that the city will buy or lease them – scenarios like these are less common but possible. In such cases, the SBA financing provides the upfront capital for the developer, while the public entity’s participation ensures a revenue stream to pay it back. While we don’t have a specific high-profile example, the framework exists. One hint of this is the SBA 504’s allowance for “mixed-use” projects and even some public use components if a business retains ownership (e.g., a business developing a facility that includes a public infrastructure element).

• Contractors in Disadvantaged Areas: SBA’s programs also support infrastructure in underserved areas. For instance, after natural disasters or in rural zones, small construction firms might get SBA 7(a) or SBA disaster loans to rebuild roads and structures. There are documented cases after hurricanes where SBA loans helped local contractors buy the equipment needed to reconstruct damaged highways and bridges (often complementing FEMA and DOT funds). Additionally, the SBA’s HUBZone program (not a loan, but a contracting program) gives preferential access to federal highway contracts for firms in certain areas, indirectly supported by SBA guidance and certification.

These examples underscore a common theme: SBA-backed funding is a catalyst for small businesses in the road construction field. It levels the playing field, allowing them to acquire assets and execute projects that would otherwise require resources only large firms have. By partnering with active lenders (banks, CDCs, credit unions, and specialized finance companies), these developers and contractors expand their capabilities. In turn, this boosts competition and capacity in the public infrastructure sector – a win-win where more companies can take on projects, and public agencies get a broader pool of contractors to build America’s roads.

Conclusion

In summary, the US road and highway construction industry is entering the latter half of the 2020s with solid growth prospects, fueled by government investment to address critical infrastructure needs. Market trends point to sustained demand from funding programs like the IIJA, tempered by challenges such as rising costs and labor shortages. Projections through 2030 suggest moderate but steady growth, as the industry works to bridge the nation’s large infrastructure gap. Contractors that adapt by embracing new technologies, workforce development, and efficient practices are poised to benefit from the ample work on the horizon. Policy support remains crucial – continued infrastructure funding and supportive regulations will underpin the industry’s success.

On the financing front, SBA loan programs will continue to play a pivotal role in empowering small and mid-sized construction businesses. Whether it’s through a 7(a) loan enabling the purchase of new machinery, a 504 loan financing a much-needed property acquisition, or a bond guarantee allowing a contractor to bid on a big highway job, these tools provide the capital and risk mitigation that keep the wheels of road construction turning. As illustrated by various success stories, SBA-backed funding helps grow local construction enterprises, which in turn build the public infrastructure essential for economic progress. With strong participation from banks, CDCs, and the SBA itself, road construction companies have a supportive financing ecosystem for projects involving property development, renovation, and expansion.

In essence, the outlook for 2025–2030 is one of opportunity and evolution: an industry adapting to meet infrastructure demands, and a financing landscape that is increasingly inclusive of small players through SBA programs. By leveraging these resources and staying attuned to market and policy trends, road and highway construction firms can pave their own road to success in the coming years.

Sources:

• IBISWorld Industry Report on Road & Highway Construction in the US

• American Society of Civil Engineers, 2025 Infrastructure Report Card (Roads)

• Infrastructure Investment and Jobs Act (2021) funding data

• Associated Builders and Contractors (ABC) analysis of construction labor needs, 2025

• Bureau of Transportation Statistics – impact of inflation on infrastructure funding

• SBA 7(a) Loan Program uses for construction firms

• SBA 504 Loan Program details (CDC Small Business Finance)

• Community Business Finance – SBA 504 construction loan checklist

• U.S. Small Business Administration – Surety Bond Guarantee Program overview

• CDC Small Business Finance – Success Story: Sierra Traffic Service (SBA 504 loan)

• LVRG LLC – construction financing case studies (combined SBA equipment & working capital)