Updated November 07, 2026
Quick answer
Construction factoring usually costs within the general range of 1-5% per invoice, with advances of 80-95% on the approved, payable part of a progress billing. Retainage, commonly 5-10%, is usually excluded, and slow payers push you up the range. Axiant Partners, a business-loan broker in Boca Raton, matches contractors with factors that handle construction. These are typical ranges across factors, not a quote.
Typical Construction Factoring Costs
We don't publish a separate construction price, because factors quote this work case by case. The table below applies the ranges on our invoice factoring rates page to situations a contractor can recognize.
| Your receivable | Likely fee zone | Why |
|---|---|---|
| Strong GC, pays near net 30 | About 1-2% | Good credit and fast pay, with steady volume |
| Mixed GCs, average pay | About 2-3.5% | Moderate volume and more verification |
| Slow GC, net 60-90 | About 3.5-5% | More tiers while the invoice is open |
| Pay-if-paid, thin file | 4-5% or more, or a decline | Higher chance that payment never comes due |
Many factors won't do construction at all, so expect fewer quotes than a staffing company would get. That is one reason a contractor can't assume the bottom of the range. Advance rates commonly run 80-95% of what's factored, with the rest held as a reserve until the customer pays.
Why Retainage Changes the Math
The percentage on the proposal applies to less than you billed. If a factor excludes retainage, your advance starts from the currently payable amount, so compare quotes on cash received, not on the headline fee. The mechanics are covered in our construction invoice factoring guide. This page is about the price.
Watch for the money sitting in two places: retainage held by the GC, and the reserve held by the factor. On a long job, both can be outstanding while your payroll runs. If retainage is the bigger problem, see our guide to the retainage cash flow gap.
Worked Example: A $100,000 Progress Billing
Illustrative numbers, not a quote. A subcontractor bills $100,000 on an approved pay application with 10% retainage. The factor advances 85% of the payable amount and charges 3.5% for 60 days.
| Item | Math | Amount |
|---|---|---|
| Billed | Approved pay application | $100,000 |
| Retainage held | 10% | $10,000 |
| Payable amount | Billed less retainage | $90,000 |
| Advance today | 85% of $90,000 | $76,500 |
| Fee at 60 days | 3.5% of $90,000 | $3,150 |
| Reserve released later | $90,000 less advance and fee | $10,350 |
So you get $76,500 now on a $100,000 billing, or about 76.5 cents on the dollar. Annualized, $3,150 on $76,500 for 60 days is about 25%, which is useful for comparing with a line of credit. That figure is only arithmetic. It doesn't include setup, wire or minimum fees. Rerun it at net 90 under tiered pricing, because the fee may rise as the invoice stays open.
What Moves Your Rate
- Who pays you. A factor relies on the GC or owner's credit more than yours, so a strong payer helps most.
- Billing quality. Signed pay applications are easier to fund than billings still open to adjustment.
- Contract language. Pay-if-paid is riskier than pay-when-paid because it can decide whether you're paid at all.
- Lien discipline. Preliminary notices and clean waivers protect the collateral behind the receivable.
- Concentration. One GC on most of your billing can lower the advance or raise the fee.
- Volume. Steady monthly volume generally earns better tiers than one-off billings.
Federal Jobs Have Their Own Rules
Factoring a federal receivable has an extra step. The Assignment of Claims Act lets money due on a federal contract be assigned to a financing institution if the contract doesn't forbid it. It goes to one party, and written notice must go to the contracting officer, any surety and the disbursing official. Primes need that paperwork, and it adds time, so ask about it before pricing the deal. Subcontractors bill the prime, not the government, and FAR 52.232-27 sets payment timing for subs on federal jobs, which can make the receivable easier to judge. Bonded private jobs raise a similar question, so tell the factor if a surety is involved.
Fees to Ask About Beyond the Rate
- Setup or due diligence. A one-time charge to open the account, which may be higher for construction review.
- Tier schedule. The exact fee at 30, 45, 60 and 90 days, not just the first tier.
- Minimums and exit. Monthly minimum volume and the penalty for leaving early.
- Recourse. When an unpaid invoice comes back to you, and how fast.
- Disputes. What happens when a GC back-charges or adjusts a billing after you've been advanced.
- Retainage. Whether it's excluded, discounted or financed separately, and on what terms.
Is factoring even the right tool? See invoice factoring and the construction financing overview, or get matched with factors that handle progress billing, and compare the cash you keep after every fee. Business-purpose financing only; all terms are set by the funder.
Frequently Asked Questions
What are typical construction factoring rates?
Expect fees within the general 1-5% per invoice range, with advances of 80-95% on the approved, payable part of a progress billing. Slow payers, pay-if-paid clauses and thin files push toward the top of that range. These are typical ranges across factors, not a quote.
Does a factor advance against retainage?
Usually not. Retainage is paid later and depends on completion, so most factors exclude it or discount it heavily. Some offer separate retainage financing.
How much cash do I get on a $100,000 progress billing?
With 10% retainage and an 85% advance, about $76,500 up front. After a 3.5% fee on $90,000, about $10,350 of reserve comes later. That example is illustrative.
Why do many factors avoid construction?
Progress billings can be adjusted or disputed, pay-if-paid clauses can make a payment contingent, and lien rights and waivers complicate collateral. Factors that do this work build those risks into their terms.
Can I factor a federal construction contract?
Often, with an assignment under the Assignment of Claims Act if the contract doesn't forbid it, and with written notice to the required officials. It takes extra time, so raise it early.
Is a line of credit cheaper than construction factoring?
Often, if you qualify, since factoring can be expensive when annualized. Factoring leans on your customer's credit, so it can fit younger contractors who can't get a large line yet.
Sources & Further Reading
- 31 U.S.C. 3727: Assignments of claims — When a federal contract payment can be assigned to a financing institution, and the required notices.
- FAR 52.232-27: Prompt Payment for Construction Contracts — Federal payment timing on construction contracts, including when subcontractors must be paid.
- CFPB Small Business Lending Research — Research on small business credit, including how costs are disclosed to borrowers.
Figures above describe ranges commonly seen across lenders and reflect published guidance as of the date on this page. Confirm current terms with the cited source or your lender before acting.