Construction & Subcontractor Factoring
Construction & Subcontractor invoice factoring deep-dive: 70–80% advance rate, 1.5–3.5% per 30 days (effective 18–42% APR), 45–75 days from work completion typical aging on Net 30 / Net 45 / Net 60 progress billings terms. Tier 1 factoring vertical — highest factoring volume + structural fit. PeerSense routes $3M–$75M annual revenue subcontractor firms to industry-specialist factors.
Key Takeaways
- Construction & Subcontractor: 70–80% advance rate, 1.5–3.5% per 30 days (effective 18–42% APR).
- Typical AR aging: 45–75 days from work completion. Common payment terms: Net 30 / Net 45 / Net 60 progress billings.
- Concentration limits: 25–35% per single GC obligor.
- Typical company size PeerSense places in this vertical: $3M–$75M annual revenue subcontractor.
- Tier 1 vertical — one of the 4 highest-volume factoring industries in the U.S..
- Top obligor profile: General contractors on commercial / institutional projects ($10M+ project size), construction managers, owner-developers with project-level financing in place.
- Critical disqualifier check: Active mechanics-lien disputes, executed unconditional lien waivers ahead of payment, residential construction (consumer not commercial), federal jobs without proper Miller Act notice, unbonded public works without payment-bond chain.
Why Construction & Subcontractor Factoring Works
Subcontractors carry payroll + material costs week-to-week but bill on AIA G702/G703 progress draws that pay 45–75 days behind. The working capital gap is the entire industry — factoring is the structural answer. Lien rights on the underlying construction project add additional collateral support that factors rely on.
**Common payment terms in construction & subcontractor:** Net 30 / Net 45 / Net 60 progress billings.
**Typical AR aging:** 45–75 days from work completion.
The gap between work performed and invoice clearance is the structural reason factoring fits this industry. Companies that try to fund the gap from operating cash flow alone end up cash-constrained on growth — they can't take on the next contract because the previous contract's AR is still outstanding. Factoring breaks the constraint by converting AR into immediate working capital.
Construction & Subcontractor Factoring — Best-Execution Specs
**Advance rate**: 70–80%
**Factor fee**: 1.5–3.5% per 30 days (effective 18–42% APR)
**Concentration limit**: 25–35% per single GC obligor
**Typical AR aging**: 45–75 days from work completion
**Common payment terms**: Net 30 / Net 45 / Net 60 progress billings
**Typical company size**: $3M–$75M annual revenue subcontractor
Worked example using these specs:
| Step | Calculation | |---|---| | Monthly invoice volume | $500,000 | | Advance rate | 80% (top of band) | | Day-of-submission funding | ~$425,000 | | Discount fee per 30 days | 1.5–3.5% per 30 days | | Typical hold | 45–75 days | | Reserve released at obligor pay | Face minus advance minus fee |
Position in the advance-rate band depends on: obligor credit mix, monthly volume committed, contract length, recourse vs non-recourse election, and notification structure.
Underwriting Nuance for Construction & Subcontractor
Factors require lien-rights preservation: pre-lien notices filed, mechanics-lien rights perfected by state deadline, no executed lien waivers ahead of payment. Many factors will ONLY fund subs who maintain perfected lien rights. Bonded jobs are sometimes excluded (surety subordination conflict) — non-bonded private commercial work is the cleanest factoring lane.
Industry-specialist factors carry deeper underwriting expertise than generalist factors. A generalist factor underwriting a construction deal often misses the industry-specific eligibility tests, which leads to either a wide-rate offer (factor pricing in unknown risk) or a decline late in the process. PeerSense routes construction deals to factors with direct industry specialty — same advance rate band, same fee band, but materially higher hit rate and faster onboarding.
Construction & Subcontractor Disqualifiers — What Blocks Factoring
Common construction factoring disqualifiers:
Active mechanics-lien disputes, executed unconditional lien waivers ahead of payment, residential construction (consumer not commercial), federal jobs without proper Miller Act notice, unbonded public works without payment-bond chain.
In addition, all-industry blockers apply: senior UCC-1 filings on AR by an existing bank lender (subordination required), active IRS tax liens (Form 14134 subordination required), state tax liens, MSAs prohibiting AR assignment, and obligor concentration above 70% on weak-credit single customer.
PeerSense pre-screens all of these blockers before any lender submission. Factor declines late in the underwriting process are damaging to the company's reputation in the factor market — pre-screening avoids the decline pattern.
Top Construction Obligor Profile
General contractors on commercial / institutional projects ($10M+ project size), construction managers, owner-developers with project-level financing in place. Best obligors are publicly-traded GCs (Turner, Skanska, Suffolk, Clark, etc.) and large private commercial GCs with audited financials.
The stronger the obligor mix, the tighter the factoring pricing. A construction company with 80% of revenue from publicly-traded Fortune 500 obligors prices 50–150 bps tighter than the same company with 80% revenue from small-private obligors. Mix matters — and obligor due diligence is one of the highest-leverage actions a company can take before approaching a factor.
PeerSense pulls obligor credit references + Dun & Bradstreet reports + obligor AP-department references before any factor submission. Obligor strength data presented up-front is a force-multiplier on advance rate negotiation.
What PeerSense Does for This Deal
PeerSense routes construction & subcontractor factoring deals to industry-specialist factors based on revenue, AR composition, obligor mix, monthly volume, and contract-length preference. We pre-screen UCC-1 senior filings, IRS lien status, MSA assignment clauses, and obligor concentration before any lender submission — files routed pre-cleared close 7–14 days faster than raw inquiries.
Our factoring fee is 10% of the recurring discount fee paid by the company to the factor — paid by the company on a monthly basis as part of the factoring relationship. No retainers, no application fees, no upfront cost.
If your construction firm is currently waiting on net-30/45 invoices and needs working capital, share the AR aging report + top-10 obligor list in the form below. PeerSense will return a structure recommendation + indicative pricing within one business day.
Other B2B Factoring Verticals
**[Staffing Agency & Workforce Solutions](/learn/b2b-factoring-strategy/staffing-agency)** (Tier 1) — 85–93% advance, 1.0–2.5% per 30 days
**[Trucking & Freight Broker](/learn/b2b-factoring-strategy/trucking-freight-broker)** (Tier 1) — 90–96% advance, 1.5–4.0% per 30 days
**[Oilfield Services](/learn/b2b-factoring-strategy/oilfield-services)** (Tier 1) — 80–88% advance, 1.5–3.5% per 30 days
**[Manufacturing & Industrial Products](/learn/b2b-factoring-strategy/manufacturing)** (Tier 1) — 75–85% advance, 1.0–2.5% per 30 days
**[Healthcare Services & Medical Receivables](/learn/b2b-factoring-strategy/healthcare-medical)** (Tier 2) — 60–75% (lower than commercial AR — payor risk + denial risk) advance, 1.5–3.5% per 30 days
**[Government Contractor](/learn/b2b-factoring-strategy/government-contractor)** (Tier 2) — 80–90% advance, 1.0–2.5% per 30 days
**[Distribution & Wholesale](/learn/b2b-factoring-strategy/distribution-wholesale)** (Tier 2) — 80–88% advance, 1.0–2.5% per 30 days
**[See the national pillar](/learn/b2b-factoring-strategy)** — full strategy, schema, and FAQ across all 8 verticals.
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Editorial integrity: Published by PeerSense Capital Advisory · Written by Ed Freeman, Founder. PeerSense is a capital advisory firm, not a lender. Content is for educational purposes and does not constitute financial, legal, or tax advice. Rates and terms cited reflect approximate April 2026 market conditions and may not reflect current conditions at the time of reading. Consult a qualified financial professional for transaction-specific guidance.