It is quite easy to understand the contribution of local contractors towards growth of national infrastructures and economy as a whole. Despite their great contributions, their capacity and capability to undertake and execute constructions projects in the required standards is highly hampered by inadequate financial resources both physical cash and equipments. It is estimated that about 60 percent of market share in the construction industry is dominated by foreign firms; whereas only 40 percent is scrambled by our local firms. The main objective of this study was to investigate the challenges facing local contractors in accessing funds from financial institutions in Tanzania. To have detailed support and evidences from previous studies, comprehensive review of literature was made basing on theoretical and empirical review. The study area was Dodoma Municipality. The selected sample was 100 respondents, but only 60 responded. Research design employed was both cross section and descriptive design. The findings indicate that the financial sources available to local contractors are banks and clients. On the other hand construction assets possessed by local contractors limit their competitiveness of accessing funds due to its low value which is equivalent to 80 percent. Other challenges includes management competence, initial payment which is not effected on time, reputation towards the eye of lenders and difficult in fulfilling the criteria of accessing funds. Key recommendations provided in this Study include formation of partnership or joint venture among local construction firms, establishment of Contractor’s bank, ensuring that financial statement submitted to financial institutions is correctly prepared; financial institutions must prepare credit policies with affordable conditions to borrowers. Therefore the government and other key players in the construction industry should strive to empower our local contractors in order to strengthen their competitiveness in this flexible construction market.