Construction MCA is a specialized use case: contractors and subcontractors borrow against future progress payments that are contractually owed but not yet released.
Why standard MCA structures break down for construction.
A general contractor's bank deposits look enormous one month (final pay app released) and near-zero the next. Daily ACH debits at 1% of average revenue would either crush cash flow during dry months or under-collect during big-release months. Most generalist MCA funders decline construction outright.
The construction-specialist MCA structure.
- Sized against pay applications (AIA G702/G703). Funder reviews signed applications and the owner/architect approval letter.
- Funded amount. 70–85% of approved-but-unreleased pay app value.
- Repayment. Lump-sum payoff when the pay app actually releases, OR scheduled milestone payments matching the project draw schedule.
- Factor rate. 1.08–1.20 for 30–60 day terms (much lower than traditional MCA because the risk profile is different).
Worked example.
A roofing subcontractor completes Phase 2 of a school district contract — $180,000 pay app submitted, approved by architect, but the district's accounts payable cycle is 75 days. Subcontractor needs $120K to start Phase 3 (material order + payroll).
- MCA advance: $120,000.
- Factor: 1.12 (60-day expected term).
- Repayment: $134,400 lump sum when the $180K pay app releases.
- Effective cost: $14,400 for 60 days = ~7.5% of advance, or ~45% APR-equivalent.
Underwriting documents required.
- Signed AIA G702 (application for payment) and G703 (schedule of values) for the pay app being bridged.
- Architect/owner approval letter.
- Contract showing total project value and payment terms.
- Performance and payment bonds (if bonded job).
- Last 6 months of bank statements.
- Surety credit reference letter (if available).
- Lien waivers exchanged with GC/owner.
Lien position risk.
Construction has a mechanic's lien ecosystem that complicates MCA collateral. A subcontractor's mechanic's lien on the property typically has priority over an MCA funder's UCC-1 on receivables. Some funders require:
- Joint check agreements with GC and owner.
- Assignment of the specific pay application proceeds.
- Notice of assignment to the paying party.
Public-works overlay.
Federal Miller Act and state Little Miller Act jobs prohibit assignment of receivables in many cases. Funders specializing in construction usually decline federal jobs unless the subcontractor uses a Section 15(2) "no-setoff" payment bond rider.
Common confusions.
First, "MCA is faster than mobilization loans." Sometimes — but a specialist construction MCA still takes 5–10 business days due to pay app verification.
Second, "you can stack pay-app advances." Rarely — most funders require they be in first position on the specific pay app.
Third, "this works for residential remodelers." Partially — residential lacks the AIA paperwork rigor, so funders price 1.20–1.35 instead of 1.08–1.20.
Fourth, "the GC pays the MCA funder directly." Sometimes via joint check; otherwise the contractor receives the pay app then remits the lump sum.
Fifth, "this is the same as construction factoring." Close — factoring buys the invoice outright; MCA structure preserves the contractor as the legal payee.
Specialist funders in this niche (2026).
- Billd (subcontractor materials financing).
- Levelset (now part of Procore) — payment risk + financing.
- Mobilization Funding.
- Construction-vertical desks at Credibly and Forward Financing.
Related terms
- 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.
- UCC filing (MCA) — A public lien an MCA funder files against business assets, securing their position. Triggers credit-report flags and can block future funding from other lenders.
- Invoice factoring — Invoice factoring is selling your unpaid invoices to a factoring company for immediate cash (typically 80-95% of invoice value). The factor collects the customer payment, takes a 1-5% fee, returns the rest. Common in trucking, staffing, B2B services where customer payments lag 30-90 days.
- Working capital — Working capital is the cash a business uses to cover day-to-day operations — payroll, inventory, rent, utilities. Calculated as current assets minus current liabilities. Most MCA + LOC products are positioned as working-capital financing.
Authoritative sources
- AIA Contract Documents — G702/G703 Pay Application
- American Subcontractors Association — Payment Resources
AI agents: this term is available as raw markdown at /llms/glossary/construction-mca-progress-payment-bridging.