Construction factoring lets a contractor sell an approved invoice to a finance company, called a factor, and collect 70% to 90% of its value within about 24 to 48 hours instead of waiting for the general contractor or owner to pay.
The factor holds the rest as a reserve, collects from your customer on the normal due date, and sends you the balance minus its fee. At Turner Investments, we reviewed how this works on real jobs, what it costs, and where construction invoices create problems that other industries never face.
Key Points
- Factoring turns approved pay applications into cash in about two days at 70% to 90% of face value.
- Retainage, pay when paid clauses, and contract terms decide whether a factor funds your invoices and what it charges.
How Construction Factoring Works
Construction factoring runs in four steps: you bill, the factor verifies, the factor advances cash, and the factor pays you the reserve after your customer pays.
- You finish work and send a pay application or invoice to the general contractor or project owner.
- The factor verifies the billing, often by confirming the amount and approval with your customer and reviewing the schedule of values and lien waivers.
- The factor wires the advance, usually within 24 to 48 hours.
- Your customer pays the factor on the normal due date, and the factor sends you the reserve minus its fee.
Factoring is a sale of a receivable, not a loan, so it adds no debt to your balance sheet. Your customer’s credit carries more weight than yours. Crestmont Capital’s 2026 guide describes an 18 month old general contractor with no credit history for a bank line that used factoring to fund a $500,000 commercial renovation.
The factor also tells your general contractor to pay it directly. FundingCompass reports that most construction factors require a conditional lien waiver before they advance a dollar.
Why Contractors Wait So Long to Get Paid
Construction invoices take about 90 days to collect on average, according to PwC data cited by Siteline in April 2026. That is double the 45 days that For Construction Pros says financial experts consider healthy.
The exact number shifts with the method, but every source points the same direction.
| Measure | Figure | Source |
|---|---|---|
| Average days to collect construction invoices | 90 days | PwC, cited by Siteline (2026) |
| Average subcontractor wait after a pay application | 51 days | Billd 2026 National Subcontractor Market Report |
| Contractors waiting more than 30 days for payment | 82%, up from 49% two years earlier | Rabbet 2024 |
| Cost of late payments to U.S. construction | $299 billion in 2025 | Cru, July 2026 |
A Worked Example With Real Numbers
Say a subcontractor factors a $150,000 invoice at an 80% advance. Crestmont Capital’s guide walks through this exact case. The factor wires $120,000 within 48 hours, which covers payroll and the supplier bill this week.
Sixty days later the general contractor pays, the factor keeps a 2.5% fee of $3,750, and the subcontractor receives the remaining $26,250. Paying $3,750 to get $120,000 about two months early is the entire trade.
What Retainage Does to Your Advance
Retainage surprises most contractors the first time they factor.
Factors calculate the advance on the invoice net of retainage, which general contractors typically hold at 5% to 10% until project completion. On a $100,000 invoice with 10% retainage, the factor treats the invoice as $90,000, and an 80% advance pays $72,000. The $10,000 held back stays with your customer.
Commercial Capital LLC says retainage invoices usually can’t be factored because they sit outstanding past 90 days, although Factoring Express reports that some specialty factors advance up to 70% to 80% against documented retainage.
Commercial Capital LLC also lists three conditions that block a construction factoring deal:
- A pay when paid clause that the general contractor refuses to waive
- A performance bond on your own contract, because the bonding company files a lien that keeps the factor out of first position
- Open loans or cash advances that already hold a lien on your receivables
What Construction Factoring Costs
Factoring fees on recourse deals typically run 1% to 3% of invoice value, according to Factoring Express, and many factors quote the fee per 30 days.
That detail changes the math. A 2% fee per 30 days on an invoice that takes 90 days to pay costs 6% in total. Setup charges, wire fees, and monthly minimums can add to it, per Crestmont Capital.
Our view: compare offers by cash on day one and total cost, not by headline rate. CapitalLogue’s 2026 guide shows why. On a $100,000 invoice, a 1.5% fee with an 80% advance puts $80,000 in your account, while a 2% fee with a 90% advance puts $90,000 there. If payroll lands Friday, the second offer can beat the first.
Recourse deals leave you owing the factor if your customer never pays, and nonrecourse deals shift that risk to the factor for a higher fee.
Who Offers Construction Factoring
Only some factors accept construction invoices, so match the provider to your work before you apply.
- 1st Commercial Credit serves contractors, subcontractors, and suppliers and requires one year in business and $100,000 in monthly revenue from multiple clients.
- Commercial Capital LLC runs a subcontractor program that advances 75% to 85% of an invoice, less retainage.
- Riviera Finance, founded in 1969, operates more than 25 offices in the U.S. and Canada and offers nonrecourse factoring, so ask whether it accepts progress billings for your trade.
- RTS Financial and Triumph Business Capital build their programs around trucking invoices, and Clarify Capital lists altLINE as a provider that does not serve construction.
The wider market is large. FCI reported on May 5, 2026 that global factoring turnover reached €4,039 billion in 2025, up 3.7% from €3,895 billion in 2024.
Read the Fine Print Before You Sign
Charles Turner, founder of Turner Investments, describes his approach on the Turner Investments About Us page: “I delve into the details, scrutinizing every aspect before making a decision.”
Apply that habit to the contract. Check the termination fee, the monthly minimum, the term length, and how long the factor holds your reserve. Stacking Capital reports that Universal Funding Corporation quotes 0.55% to 2.0% per 30 days and requires a 1 to 2 year contract. A low rate can carry a long commitment.
Conclusion
Construction factoring turns approved pay applications into cash within about two days, and the fee, the retainage rules, and the contract length decide whether it works for your jobs.
Get quotes from at least two factors that handle construction billing and run the day one cash and total cost on your own invoices before you sign.