Construction is the hardest mainstream factoring niche, and this page won’t soften that. Most invoices in most industries are simple — work done, bill sent, payment due. A construction receivable is none of those things: it is a progress billing that must be certified before it is owed, it arrives with retainage carved out, and a pay-when-paid or pay-if-paid clause may make your right to the money depend on someone you have never met — the owner — paying someone else. Many conventional factoring companies decline progress-billing clients outright (Commercial Capital says so plainly); the specialists who stay charge accordingly. Here is the friction, mechanic by mechanic, and a checklist for whether a factor will take your invoice at all. The generic product is covered in what is invoice factoring; cost mechanics in depth are in the costs and rates guide.
General information, not financial advice. Figures below are attributed ranges from the named specialist sources. Nothing here promises that a given pay application can be funded — in construction, plenty cannot.
The receivable a factor buys is not your invoice — it is a certified pay application: an AIA-style G702/G703 (or the project’s equivalent) approved by the general contractor or owner. That approval is what turns your billing into an enforceable obligation. Unapproved pay applications, retainage-only receivables and disputed invoices do not qualify (Axiant; FundingCompass; IFXI). If your pay app is still sitting in review, there is nothing to factor yet.
GCs and owners withhold 5–10% of every progress payment as retainage until substantial completion. Factors advance only against the currently payable, non-retained portion: a $100,000 billing with 10% retainage is a ~$90,000 receivable to a factor, not a $100,000 one (Bay Street Lending; Commercial Capital; Axiant). The retainage itself is released by the GC at completion, outside the factored deal entirely (Bay Street) — you cannot factor money that is not yet payable, and no advance rate fixes that.
Take that $100,000 progress billing with 10% retainage, factored at an 80% advance and a 3% per-30-days fee, with the GC paying on day 60 — an illustration built from the ranges on this page:
Payment cycles in construction run 30–120+ days (FactorAvenue), and every extra 30 days adds another period of fee — at the long end of that range the discount is the story, which is why the costs guide matters more here than anywhere else in the cluster. Advances run 70–85% of the non-retained billing (Bay Street; REIL Capital; FundingCompass) and fees roughly 1.5–5% per 30 days, commonly 2–5% — among the highest of any factored industry (Bay Street; REIL; FundingCompass).
One practical tool from the specialist playbook: some factors neutralize a pay-when-paid clause with a GC acceptance letter confirming the work is complete, accepted, and payable on standard net terms (Commercial Capital). If a factor won’t fund your pay app, ask whether an acceptance letter changes the answer before you accept a lower advance. Expect also to sign a conditional lien waiver for the billing period alongside the advance — you exchange lien rights on that billing for speed (Bay Street; FundingCompass). And expect recourse: given the payment chain, most construction factoring is recourse-based (pronovos). The contract audit for all of this is in how to choose a factoring company.
If your bottleneck is the equipment on the job rather than the billing cycle, that is a different product entirely — see how equipment financing works.
Can you factor construction invoices? Some of them. A factor can fund a certified, approved pay application — the G702/G703 your GC or owner has signed off on. Unapproved applications, disputed billings and retainage cannot be factored, and many conventional factors decline construction paper altogether; this is a specialist market (Axiant; Commercial Capital).
Why can’t retainage be financed? Because retainage is not yet payable. The 5–10% withheld from each progress payment is released by the GC only at substantial completion, so there is no current receivable for a factor to buy. Factors advance against the non-retained portion only, and the retainage reaches you through the project, not through the factor (Commercial Capital’s FAQ makes the same point).
Do factoring companies accept progress billing? Specialist construction factors do — it is the only kind of construction receivable there is. Generalist factors often do not: Commercial Capital notes that progress invoices are harder to process and riskier than standard invoices, which is why the construction factors price at the top of the factoring range.
How does a pay-when-paid clause affect factoring? Pay-when-paid delays payment until the owner pays the GC, so factors accept it but price the longer wait. Its harder cousin, pay-if-paid, makes owner payment a condition of your right to be paid at all — then the factor underwrites the owner’s credit too, and may cut the advance by 5–10 points, demand proof of owner funding, or decline (Bay Street Lending).
General information, not financial advice. Sources: Bay Street Lending (construction factoring guide; retainage; pay-when/if-paid); Commercial Capital (progress-billing and retainage FAQs; GC acceptance letters); Axiant (fundable billings; retainage); FundingCompass and REIL Capital (advance and fee ranges); IFXI (approved billings); FactorAtlas (pay-if-paid underwriting); FactorAvenue (payment cycles); pronovos (recourse practice). Currency verified 2026-10-23.