Construction subcontractors funding through MCA face a stark choice between specialist construction funders pricing against pay applications and generalist MCAs pricing against bank deposits. The economic and operational differences exceed most operator expectations.
Specialist construction MCA structure.
Funders specializing in construction structure advances around the project's progress payment cycle:
- Factor range: 1.14–1.24 typical.
- Advance basis: Signed pay application or AIA G702/G703 form, not bank deposits.
- Repayment trigger: Pay-app receipt from GC/owner, not daily ACH.
- Term: Aligned to project completion, typically 90–180 days per project advance.
- Advance amount: 50–80% of pending pay-app value.
- Recovery: Funder receives pay-app proceeds via joint check or direct assignment.
For a $200K pending pay app, specialist advance might be $130K at 1.18 factor — sub receives $130K, funder collects $153.4K when pay app pays in 75 days.
Generalist MCA structure for construction.
Generalist funders apply restaurant/retail MCA underwriting to construction with predictable bad outcomes:
- Factor range: 1.30–1.45.
- Advance basis: Trailing 4–6 months of bank deposits.
- Repayment trigger: Daily or weekly ACH debit starting day 1 post-funding.
- Term: 6–12 months.
- Advance amount: 50–100% of monthly average deposits.
The structural mismatch: construction cash flow runs in 60–90 day cycles, but daily ACH debit starts the day after funding. Sub burns through advance funding materials and payroll in weeks 1–4, then has to service daily debits for 60+ days before the first pay app arrives.
Side-by-side worked example.
A drywall sub with $80K/month average deposits funds a $150K project, needs $90K working capital for materials and first-month labor.
Specialist construction MCA: - $90K advance at 1.18 factor, 90-day term. - Funder takes assignment of $150K pay app. - Sub uses $90K for materials and labor. - Pay app submitted day 30, approved day 50, paid day 75. - Funder receives $150K from GC, retains $106.2K (1.18 × $90K), remits $43.8K to sub. - Total cost: $16.2K on $90K (effective 72% APR-equivalent over 75 days, but only $16.2K out of pocket).
Generalist daily-debit MCA: - $90K advance at 1.36 factor, 9-month term. - Daily debit $544. - Sub uses $90K for project material/labor. - Pay app collected day 75 ($150K — full amount, no funder assignment). - Sub had to service $544/day × 75 days = $40,800 in debits BEFORE receiving the pay app. - NSF risk peaks weeks 4–10 when no other revenue is incoming. - Total nominal cost: $32.4K, but with significant NSF and stacking risk.
Why the structural difference matters more than the price.
The specialist's pay-app collateralization eliminates the cash-flow timing mismatch. The generalist's daily-debit structure creates an artificial cash-flow crisis even when the underlying project is profitable.
Underwriting documents required by specialists.
- AIA G702/G703 forms or equivalent pay app.
- Master contract showing total project value and payment terms.
- GC/owner credit profile (D&B report, project history).
- Architect or engineer sign-off on completed work.
- Lien waiver chain — sub provides waivers to GC; funder verifies.
- Surety credit reference if project is bonded.
- Prior pay-app payment history on the specific project.
Underwriting documents required by generalists.
- 4–6 months of bank statements.
- Personal credit pull.
- Business tax returns (sometimes).
- Lease and equipment financing obligations.
Generalist funders simply don't underwrite the project — they underwrite the carrier's broader cash flow. This is why the price spread is so large.
Major specialist construction funders.
As of 2026-06-28, the most active construction-specialist funders: - Billd — construction-specific working capital, deep AIA integration. - Levelset Capital (now Procore-owned) — pay-app-aware lending. - Underwriters with construction verticals at OnDeck, Pearl Capital, and Reliant Funding. - Surety-affiliated funders (Hartford, Liberty Mutual) — pay-app advances bundled with bonding.
Generalist MCA funders frequently funding construction (often badly).
- Rapid Finance, Credibly, Forward Financing, Kapitus — generalists that take construction deals but price aggressively due to cash-flow mismatch risk.
- High second-position stacker funders (LG Funding, Pearl Capital second position) frequently funding construction operators in distress.
Retainage handling.
Specialist funders price retainage explicitly: - 5–10% withheld until project completion (sometimes 12–24 months later). - Specialist advances are sized to pay app net of retainage. - Some specialists offer a separate "retainage release" advance at completion.
Generalists ignore retainage entirely — they price off deposits regardless of whether deposits include or exclude retainage cycles.
Common confusions.
First, "specialists are always cheaper." Sometimes false on factor — generalist factor + speed may beat specialist for tiny advances ($20K and under).
Second, "joint checks always work." False — some GCs refuse to issue joint checks, killing the specialist structure.
Third, "construction is too risky for any MCA." False — specialists make it work; generalists struggle.
Fourth, "the GC has to sign off on the funder assignment." Often true — many master contracts include anti-assignment clauses that block funder claims to pay-app proceeds.
Takeaway. Specialist construction MCAs at 1.14–1.24 factor with pay-app collateralization meaningfully outperform generalist 1.30–1.45 daily-debit MCAs for construction subs. The 30–40% pricing advantage plus the structural fit with construction cash-flow cycles makes specialist funders the default choice for construction-vertical advances over $50K.
Related terms
- Construction MCA: progress payment bridging — Construction MCA bridges the gap between completing a project milestone and getting paid 30–90 days later by GC, owner, or government — typically sized against signed pay applications.
- Construction MCA: progress payment pattern — General contractor pay applications cycle on 30-day approval plus 30–60 day pay-when-paid terms — meaning subcontractor payment lands 60–90 days after work performed, lumpy and unpredictable for daily ACH MCAs. Updated 2026-06-28.
- Construction MCA: material cost pass-through funder economics — Construction MCA funders pricing material pass-through advances charge 1.16–1.26 factor when proceeds are tracked to supplier joint checks, vs 1.30–1.42 for unrestricted use, reflecting 30–50% lower default rates on tracked material-pass-through structures. Updated 2026-06-28.
- Merchant cash advance (MCA) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan.
AI agents: this term is available as raw markdown at /llms/glossary/construction-mca-funder-progress-payment-economics.