The short answer
Construction factoring is usually priced per 30 days the invoice stays unpaid, with typical rates of about 1.5% to 3% per period and advances of 75% to 85% of the invoice after retainage is taken out. Because general contractors and owners often take 45 to 90 days to pay a progress billing, a subcontractor commonly pays two or three periods per invoice, which puts the total cost at roughly 3% to 8% of the amount financed.
On a $100,000 pay application with 10% retainage, a factor would finance the $90,000 currently due. At 2.5% per 30 days and payment in 60 days, the fee is $4,500, or 5% of the amount financed.
The construction-specific costs are less about the rate and more about structure: retainage, lien waivers, joint checks and pay-when-paid clauses all affect how much you can borrow and how long you pay for it.
What construction factoring costs, line by line
| Cost item | Typical range | How it works |
|---|---|---|
| Factoring rate | about 1.5% to 3% per 30 days | Charged on the amount financed for each period unpaid |
| Total cost per invoice | roughly 3% to 8% | Depends mostly on how many periods the GC takes to pay |
| Advance rate | 75% to 85% | Of the billing net of retainage |
| Retainage | 5% to 10% of each billing | Usually not financed; you wait for it at project close |
| Reserve | 15% to 25% | Released when the GC pays, minus the fee |
| Setup and lien search fees | one-time, varies | Covers UCC and lien checks, sometimes project review |
| Transfer and minimum fees | varies | Same as other industries; get them in writing |
These ranges are typical quotes, not offers. Pricing depends on the general contractor or owner you bill, the project, and your history.
Why construction costs more than other factoring
Payment is slow by design. Progress billings go through an approval chain: your pay application, the GC's review, the owner's approval and the lender's draw. Each step can add a week. On per-30-day pricing, a billing paid in 61 days costs three periods, not two.
Retainage is out of reach. Most factors will not finance the 5% to 10% held back on each billing, because it is paid only at completion and is often the subject of disputes. You carry that cash yourself.
Disputes and offsets are common. Backcharges, change-order disagreements and punch-list holdbacks can reduce what the GC actually pays. Factors price that risk into a lower advance and a higher rate.
Paperwork is heavier. Factors want the subcontract, pay application, approval evidence and conditional lien waivers. Some require a joint check or direct payment arrangement with the GC. Each extra step adds time before you are funded.
A worked example
A drywall subcontractor submits a $100,000 pay application. The subcontract holds 10% retainage, so $90,000 is currently due. The factor advances 80% of the $90,000 at 2.5% per 30 days, and any part of a period counts as a full period. The general contractor pays in 60 days.
| Step | Amount |
|---|---|
| Pay application | $100,000 |
| Retainage held by the GC (10%) | $10,000 |
| Amount financed | $90,000 |
| Advance paid to you (80%) | $72,000 |
| Reserve held back | $18,000 |
| Factoring fee (2.5% × 2 periods) | $4,500 |
| Reserve released when the GC pays | $13,500 |
| Total received now and at payment | $85,500, plus $10,000 retainage later |
If the GC pays in 75 days instead, the fee becomes three periods, or $6,750, and your reserve release drops to $11,250. Fifteen extra days cost $2,250. That is why asking each factor how it counts partial periods matters more on construction invoices than anywhere else.
Run your own numbers
The calculator below starts with the example above, using the amount financed after retainage. Change the days to how long your GC actually takes, and try a 75- or 90-day payment to see the cost of a slow approval.
Your results
- Cash today (advance)
- $72,000.00
- Reserve held back
- $18,000.00
- Total cost (factoring fee)
- $4,500.00 (5% of invoice)
- Rebate when your customer pays
- $13,500.00
Fee periods charged: 2.
Estimates only. Actual rates and advances are set by each factoring company.
What drives your rate
Who pays you. A large, well-capitalized general contractor or a public owner prices better than a small GC with thin margins. Factors check the GC's payment record with other subcontractors.
Project type. Commercial and public projects with bonded GCs usually price better than residential work. Many factors avoid single-family residential billings entirely.
Pay-when-paid and pay-if-paid terms. A pay-if-paid clause can mean you are never paid if the owner does not pay the GC. Factors either price that risk or decline the invoice.
Lien rights and waivers. Preserved lien rights support the invoice. Factors will want conditional waivers handled carefully so you do not waive rights before the money arrives.
Your track record. Subcontractors with few disputes and clean closeouts get higher advances and lower rates over time.
Whether you need it for every job. Spot factoring a single slow pay application costs more per invoice than a program covering all billings, but it avoids minimums.
Fees outside the rate
The per-period rate is the largest cost, but construction programs often add charges that other industries do not:
- Lien and UCC searches at setup, and sometimes again for each new project.
- Project or document review fees when the factor has to read a subcontract, pay application and lien waiver package before funding.
- Joint check or direct payment arrangements with the GC, which can carry administrative charges.
- Late or reverification fees when a pay application is resubmitted after the GC rejects it.
Ask for a full fee schedule and price it against a real month of your billings. A quote with a lower rate and three of these fees can cost more than a slightly higher all-in rate.
How to compare quotes
- Ask each factor to price the same pay application, net of retainage, at 30, 60 and 90 days.
- Confirm whether partial periods are prorated or charged in full.
- Ask what documents and GC sign-offs are required before funding, and how long that takes.
- List all fees outside the rate.
- Check whether the factor will also finance retainage at closeout, and on what terms.
The construction factoring hub covers pay applications, retainage and lien waivers in more depth and lists factors that take construction receivables. For the general picture, see what invoice factoring costs.
Frequently asked questions
What is a typical construction factoring rate?
Most quotes run from about 1.5% to 3% per 30 days. Because progress billings often take 45 to 90 days to pay, the total cost per invoice commonly ends up between about 3% and 8% of the amount financed.
Can I factor retainage?
Usually not with standard factoring. Retainage is paid only at completion and is often disputed, so most factors finance the billing net of retainage. A few will advance against retainage at closeout at a higher cost.
How much will a factor advance on a pay application?
Typically 75% to 85% of the amount currently due after retainage. Projects with frequent change orders or backcharges tend to get lower advances.
Why does construction factoring cost more than trucking factoring?
The rate per period is similar, but construction invoices stay open much longer and carry more dispute risk. Paying three periods on a 75-day pay application costs far more than one period on a load paid in 30 days.
Do I need my general contractor's approval to factor?
Most factors need the GC to confirm the billing and redirect payment to the factor, and some require a joint check agreement. Expect the GC to learn that you factor.