Construction Factoring: Turn Contracts Into Cash Flow

Construction Factoring: Contractor Funding

Your pay application is approved, the GC pays in 60 days, and your crew, materials and subs are due now. You receive 70%–90% of approved progress billings, with same-day approval and funding in 24 hours once your account is active, and you keep the job moving without adding debt.

  • ✓Advance rate: 70%–90% on approved progress billings and AIA pay applications.
  • ✓Built around the draw schedule. You submit each approved pay application with its conditional lien waiver.
  • ✓The GC’s or owner’s credit carries the decision. Your credit score does not decide approval.
70%–90%Advance on approved pay applications
Same DayApproval on a complete application
24 hrsFunding once your account is active

Quote factoring on progress invoices

Enter your monthly billing and payment terms for an estimated advance on approved progress billing.

Executive Summary: Construction Factoring

1

What it is: Construction factoring is defined as advancing cash against approved progress billings and pay applications for contractors and subcontractors. You sell the approved billing to IFXI’s lending partner for a cash advance. It is not a loan: no debt goes on your balance sheet.

2

The numbers: Advance rate: 70%–90% of approved billing · Approval: same day on a complete application · Closing: 2–5 days · Funding: 24 hours once your account is active · Factoring fees: 1%–3% per period · Estimated minimum monthly volume: ~$50,000 · No minimum credit score.

3

Key constraints: Only B2B construction billing the GC or owner has approved qualifies. Retainage-only receivables, unapproved change orders, disputed pay applications and invoices past due more than 90 days are excluded. Under a recourse program you keep liability if the GC does not pay.

The Fast Facts on Construction Factoring

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How fast is construction factoring?

The short answer for construction factoring is same-day approval and a 2–5 day close for a new account. Once your account is active, each approved pay application you submit with its conditional lien waiver funds within 24 hours, so you can plan the first draw around the setup window.

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What does construction factoring cost?

The short answer is that construction factoring costs 1% to 3% of the approved billing per period, assessed when the GC or owner pays. The payer’s credit, its payment cycle and your monthly volume set where you land. See how the factoring fee is set.

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Can subcontractors factor invoices with progress billing?

Yes, you can factor approved progress billing as a subcontractor when the GC or owner paying it has acceptable credit. You submit the approved pay application and a conditional lien waiver. See subcontractor financing for trade-specific detail.

Cash flow gaps construction factoring can close

GC pay cycles run 60 to 90 days

You billed completed work, the architect signed off, and the GC still pays on its own cycle. Retainage takes another slice of each draw until closeout.

Materials and payroll come before the draw

Steel, wire and concrete are due on delivery, and your crew is paid weekly. Factoring approved pay applications covers those costs, and payroll funding helps when wages come first.

A bigger contract outruns your credit line

A new GC on longer terms can double your receivables before the first check clears. The lending partner reviews the GC or owner who pays, so challenged credit does not rule you out.

How construction factoring fits the pay application cycle

Pay applications and lien waivers

You bill monthly on a pay application such as an AIA G702 with a G703 continuation sheet. A conditional lien waiver releases your lien rights for that amount only when payment arrives, so the GC can pay the lending partner without lien exposure.

Pay-when-paid and retainage

Many subcontracts say the GC pays you when the owner pays it, which stretches your cycle past the GC’s terms. Retainage withholds part of each draw until completion, and retainage-only receivables do not qualify.

Who uses construction factoring

Specialty subcontractors in electrical, mechanical and concrete, general contractors carrying their own subs, and contractors on public jobs with bonds under the Miller Act. Agency work pairs with government contract financing; the basics are in factoring.

Typical Projects

Three construction billing types and what each needs

Construction billing runs on pay applications, lien waivers and retainage. Each job type below needs its own paperwork before an advance.

Electrical, mechanical & specialty trades

AIA progress billing

You bill monthly against percentage of completion on a G702 and G703, then wait on the architect, the GC and the owner’s draw schedule before anything clears.

Typical pay application$50,000–$400,000

GC payment cycleNet-45 to Net-75 after draw approval

Advance rate70%–90% of approved billing

Estimated fee1%–3% per 30 days

Funding cycle24 hours from an approved pay application once your account is active

What you submit

✓ Signed G702 and G703 continuation sheet

✓ Conditional lien waiver for the billed period

✓ Executed subcontract and approved change orders

✓ Certificate of insurance listing the GC as additional insured

What delays funding: change order work billed before it is signed. Unapproved change orders sit outside the advance until the GC executes them.

Commercial subs on retainage jobs

Retainage-heavy contracts

Five or ten percent of every draw is withheld until substantial completion, which can be a year out. Your profit is parked in retainage while payroll is weekly.

Typical contract value$500,000–$5,000,000

Retainage withheld5%–10% until completion

Advance rate70%–90% of approved billing

Estimated fee1%–3% per 30 days

Funding cycle24 hours once your account is active; contract review at setup

What you submit

✓ Full subcontract showing the retainage clause

✓ Schedule of values and current billing to date

✓ Payment bond information if the job is bonded

✓ Job cost report showing committed costs

What delays funding: a pay application the GC has not approved. Retainage-only receivables do not qualify.

Public works & municipal contractors

Prevailing wage public projects

City, county and state jobs pay reliably but slowly, and they require certified payroll every week before a pay application is even considered complete.

Typical pay application$75,000–$750,000

Agency termsNet-45 to Net-90

Advance rate70%–90% of approved billing

Estimated fee1%–3% per 30 days

Funding cycle24 hours once your account is active; agency assignment at setup

What you submit

✓ Certified payroll reports for the billed period

✓ Approved pay application stamped by the agency

✓ Notice of assignment accepted by the public body

✓ Performance and payment bonds on the project

What delays funding: a public agency that will not acknowledge an assignment of payment. Some municipalities require their own form, which adds days before the first advance.

Supplying materials or doing service and repair work for commercial customers? Describe the job type in the quote form, and an IFXI specialist forwards it with your request.

How to get funded with construction factoring in 3 steps

1

Request your quote

Send the approved pay application, its conditional lien waiver and your AR aging report through the quote form. An IFXI specialist reviews your request and forwards it the same day.

2

Approval & funding

The lending partner confirms the GC or owner approved the billing, checks the payer’s credit and sends a Notice of Assignment. Approval comes the same day and your account closes in 2–5 days. You then receive 70%–90% of each approved pay application within 24 hours once your account is active.

3

Receive your reserve rebate

The GC or owner pays the lending partner on its normal cycle. After that payment clears, you receive the reserve minus the factoring fee.

How money moves in construction factoring: you request a quote, an IFXI specialist forwards it, the lending partner advances 70% to 90% of approved pay applications, the GC or owner pays the lending partner, and you receive the reserve minus the fee.YouIFXI specialistLending partnerGC or owner1. Quote request2. Forwarded same day3. Advance of 70%–90%; reserve minus fee after step 4You submit the pay application4. Pays per Notice of Assignment

Funding timeline for construction factoring

StageTypical Timeframe
Quote request submittedDay 0
Credit review and approvalSame day on a complete application
Account setup and UCC-1 filing2–5 days to close
First pay application funded24 hours after your account activates
Ongoing pay applicationsSame-day funding
Reserve rebate releasedAfter the GC or owner payment clears

Timeline notes for construction factoring

  • ✓Submit each pay application after the GC or owner approves it, with the conditional lien waiver for that period.
  • ✓Change order work counts once the change order is signed.
  • ✓The lending partner files a UCC-1 financing statement on your receivables when your account opens.
  • ✓Under recourse factoring you keep liability if the GC does not pay. Non-recourse covers nonpayment for a reason the agreement covers, such as the GC’s insolvency, and prices toward the higher end of the 1%–3% range.
  • ✓Estimated minimum monthly volume: $50,000 per month, varying by program.

Who qualifies for construction factoring and what you need

RequirementWhat qualifiesNotes
Invoice typeApproved progress billings and pay applications on B2B contractsRetainage-only receivables do not qualify.
Lien waiversA conditional lien waiver for each billed periodAn unconditional waiver follows once payment clears.
Payer creditA GC, owner or public agency with acceptable creditThe credit review looks first at who pays the billing.
Invoice ageUnder 90 days past dueOlder billings do not qualify.
Existing liensNo UCC lien from another lender on your receivablesA tax lien does not rule you out; it gets a case-by-case review.
Monthly volumeEstimated ~$50,000 a monthNo maximum.
Your creditNo minimum credit scoreThe application authorizes business and personal credit reports.

Quote documents for construction factoring

  • ✓The approved pay application or progress invoice.
  • ✓The conditional lien waiver for the billed period.
  • ✓The executed subcontract or prime contract and signed change orders.
  • ✓An accounts receivable aging report and your certificate of insurance.

What delays funding: a pay application the GC has not approved, an unsigned change order, and a missing lien waiver.

Transparent Costs for Construction Factoring

What to Expect in CostsWhat Affects the Costs
Advance rate: 70%–90% of each approved pay application, paid up front.

Factoring fee: 1%–3% of the billing, assessed when the GC or owner pays.

Reserve: the remaining 10%–30%, released after payment less the fee.		Payer credit: public agencies and large GCs earn lower rates.

Payment cycle: net-30 pay applications cost less than net-60.

Monthly volume: steady billing earns a lower rate.

Recourse: non-recourse prices higher. See pricing.

Worked example: a $80,000 pay application

LineAmount
Invoice face value$80,000
Advance at 80%$64,000
Reserve held (20%)$16,000
Factoring fee at 2%$1,600
Reserve released after the GC pays$14,400
You receive in all$78,400

Illustrative example inside the published ranges. Your quote sets your actual advance rate and fee. See what invoice factoring costs across payment terms.

Construction Factoring vs. Bank Line of Credit vs. Merchant Cash Advance (MCA)

FeatureConstruction FactoringBank Line of CreditMerchant Cash Advance (MCA)
Typical Approval SpeedSame dayEstimated 2–8 weeks1–3 days
Min. Credit Score RequirementNone: approval rests on the GC or ownerEstimated 650–700+ (owner personal)Estimated 500+ (owner personal)
Maximum Advance Rate70%–90% of approved pay applicationsVariable (% of collateral or assets)Estimated 70%–80% of monthly revenue
Debt Added to Balance Sheet?No: you sell a receivableYes: revolving debt liabilityYes: recorded as a liability
Hidden Fees / Covenants1%–3% fee disclosed up frontOrigination, maintenance, annual review, covenantsFactor rates, daily ACH debits, prepayment penalties (Variable/Estimated)
Best ForContractors and subs with approved pay applications on 45 to 90 day cyclesEstablished contractors with strong financials and collateralBusinesses with steady deposits and no billings to factor

When construction factoring is not the right fit

  • ✗It costs more than a bank line over a full year. A 2% fee per 30-day period on a pay application that pays in 60 days comes to 4%, about 24% a year (2% × 12 periods). If your company qualifies for a bank line, it usually costs less.
  • ✗The GC sees the arrangement. The GC or owner receives a Notice of Assignment and pays the lending partner directly.
  • ✗You carry the risk under recourse. If the GC does not pay, you repay the advance on that billing.
  • ✗A UCC-1 goes on your receivables. Article 9 of the UCC covers sales of accounts, so the filing can block other financing secured by the same receivables until the relationship ends.

How IFXI handles your request for construction factoring

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No long-term contracts

The lending partner’s factoring agreement has no long-term contract, which suits work that runs job by job.

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Transparent fees

You see the 1%–3% fee before you factor, so you can build it into your bid.

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An IFXI specialist on your request

An IFXI specialist reviews your quote request, gathers what is needed for approval, and forwards your file the same day.

Funding scenarios for construction factoring

Illustrative example · September 2026 · Houston, TX

Electrical sub covers two overlapping jobs

Funding Amount
$150,000
Industry
Electrical subcontracting
Customer Type
Commercial general contractor
Funding Type
Construction factoring
Invoice Terms
Net-60, pay-when-paid
Advance Rate
85%
The Problem

Two commercial jobs billed in the same month, with wire and switchgear due on delivery and the GC paying on a 60-day cycle.

The Solution

The account was approved the same day and closed in 4 days. Once it was active, the sub factored both approved pay applications with conditional lien waivers.

Result

$127,500 advanced. Material and payroll on both jobs were paid on schedule.

Illustrative example · July 2026 · Atlanta, GA

Concrete contractor takes on a larger GC

Funding Amount
$240,000
Industry
Concrete and foundations
Customer Type
Regional general contractor
Funding Type
Construction factoring
Invoice Terms
Net-45
Advance Rate
80%
The Problem

A new GC relationship tripled monthly billing, and the bank line was sized for the old volume.

The Solution

Once the account was active, the contractor factored each approved monthly pay application at 80%.

Result

$192,000 advanced. The contractor staffed the larger pour schedule without a new loan.

Illustrative example · May 2026 · Orlando, FL

HVAC sub funds a public school retrofit

Funding Amount
$90,000
Industry
HVAC subcontracting
Customer Type
General contractor on a county school project
Funding Type
Construction factoring
Invoice Terms
Net-75
Advance Rate
75%
The Problem

The county approved pay applications monthly, and the GC paid subs only after the county paid it.

The Solution

Once the account was active, the sub factored approved progress billing with the signed conditional lien waiver at 75%.

Result

$67,500 advanced. Equipment orders went out ahead of the summer install window.

Where IFXI arranges construction factoring

We connect B2B businesses with invoice factoring in:
Texas, Florida, New York, Illinois, Georgia, Ohio, and Pennsylvania.
In Texas, see invoice factoring in Houston, Dallas and Austin.

Frequently asked questions about construction factoring

What is construction factoring and how does it work?

Construction factoring is defined as advancing cash against approved progress billings and pay applications for contractors and subcontractors. You sell the approved billing to the lending partner, receive 70%–90% up front, and receive the reserve minus a 1%–3% fee after the GC or owner pays.

The GC or owner pays the lending partner directly under a Notice of Assignment, and you supply a conditional lien waiver with each pay application.

Yes, you can factor approved progress billing as a subcontractor when the GC or owner has acceptable credit and has approved the pay application. You submit the approved billing and a conditional lien waiver, and you receive 70%–90% within 24 hours once your account is active.

The short answer is that retainage-only receivables do not qualify for construction factoring. You factor the approved progress billing and pay applications the GC or owner owes you now, and retainage stays held under your contract until the owner releases it at closeout.

The short answer is that factoring an $80,000 pay application costs about $1,600 at a 2% fee. At an 80% advance rate you receive $64,000 up front, then $14,400 of the $16,000 reserve after the GC pays. Your fee sits between 1% and 3%, so it runs $800 to $2,400 on an $80,000 pay application.

The short answer is that a conditional lien waiver releases your lien rights for the billed amount once payment arrives. It lets the GC or owner pay the lending partner without lien exposure, and it ties each advance to a specific approved pay application.

The short answer is yes: the GC or owner receives a Notice of Assignment telling it to pay factored billings to the lending partner. Under UCC §9-406, once the payer has that notice, it settles the billing only by paying as the notice directs.

The short answer is retainage-only receivables, pay applications the GC or owner has not approved, unsigned change orders, disputed billing, and invoices past due more than 90 days. Consumer residential work also does not qualify, and a tax lien gets a case-by-case review instead of an automatic decline.

Sources

General information about construction factoring. Rates, advance amounts and approval come from IFXI’s lending partner after its review and can change.

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