Construction MCA: progress payment economics, the detailed 2026 playbook.

The shape of the AIA G702/G703 cycle

The American Institute of Architects' G702 (Application and Certification for Payment) and G703 (Continuation Sheet) are the standard payment-application forms on commercial and institutional construction projects. They define the rhythm that every GC and significant sub lives on:

• Day 1-25 of the month: work in place gets installed, materials are stored, change orders accumulate
• Day 25-30: submit G702/G703 covering work completed through the month, with supporting documentation, lien waivers from subs and material suppliers
• Day 30 - day 10 (next month): owner's architect reviews, certifies value of work in place, sometimes negotiates line items
• Day 10 - day 30 (next month): owner releases certified payment minus retainage (typically 5-10%)
• End of project: retainage release follows substantial completion, often 30-90 days after final punch list is signed off

For a GC running a $3M tenant improvement over 6 months, the cash flow looks like monthly draws of $450K-$550K gross, $400K-$500K net after retainage, with the final $300K of retainage released 60-90 days after substantial completion. Subs run a similar rhythm at smaller scale — typically $50K-$150K monthly draws, retainage withheld at the GC level until the GC gets paid, often with an additional 10-15 day lag on top of the owner-GC cycle.

How MCA funders read construction bank statements

Every serious construction-focused MCA funder in 2026 uses a bank statement parser that's been trained on construction industry deposit patterns. The parser doesn't penalize lumpy deposits the way it would for a restaurant — it expects them. For a construction submission, the analysis runs roughly:

• Vertical tag: construction/contracting (from MCC code, plus recurring deposits from named GCs, owners, or property management companies)
• Deposit lumpiness adjustment: on. The trended analysis looks at trailing 6-12 month total rather than month-to-month variance.
• Draw cycle pattern detection: identifies the typical "big deposit day-of-month" (around the 25th-30th of the month for most GCs) and the gap pattern between draws.
• Sub vs GC distinction: sub deposits typically include a lot of small recurring payments to suppliers; GC deposits typically include a few large monthly inflows. The parser scores these differently.
• Mechanic's lien exposure check: funders sometimes pull public records for filed liens against the business. Multiple open liens is a red flag.

The single most important variable for a construction submission is whether the trailing 12-month total deposit volume is healthy and trending up, regardless of the month-to- month variance. Construction businesses with $1.5M-$3M in trailing annual deposits get approved at meaningfully better terms than businesses with $400K-$800K, even if the month-to-month volatility is similar.

Worked example: $1.8M-annual GC, $80K advance

A specialty GC doing $1.8M in annual revenue, currently running three concurrent projects (a TI, a small ground-up, and a retail renovation). Average draw of $150K every 30-45 days, retainage exposure of $250K across the three projects. Needs $80K to cover payroll and material payments during a 50-day gap between draw releases.

Underwriting view:

• Trailing 12-month deposits: $1.85M (healthy)
• Trailing 6-month average monthly deposit: $145K (lumpy: ranges from $40K in slow months to $280K in heavy draw months)
• NSF count trailing 90 days: 1 (during the 50-day gap currently being experienced)
• Open mechanic's liens against the business: 0
• Paper grade: A-/B+ (would be A in restaurant context; construction volatility pulls it down one notch)

Likely offer shape:

• $75,000 - $100,000 advance
• 1.34 - 1.40 factor
• 9-12 month term
• $400-$520/day fixed ACH
• Reconciliation clause sometimes available with construction-specific language

The economics work because the deposits, while lumpy, are large enough that the daily ACH compresses to a manageable percentage of total revenue. On a $1.8M business, $500/day ACH = ~$10,500/month outflow = 7% of trailing average. That's tight but absorbable during normal draw cycles and survivable through one gap month.

The same business in a 90-day gap

Same GC, but a $300K draw is hung up in architect certification for 60 extra days. The $500/day MCA daily continues regardless. Bank balance compresses sharply because two payroll cycles ($85K each) plus material payments ($60K) hit during the gap before any new draw lands. The operator now faces:

• NSF risk on the upcoming payroll
• Pressure to delay sub payments, which damages relationships and triggers liens
• Temptation to take a second MCA to bridge the second 30 days of the gap

The right move is to invoke reconciliation against the documented draw delay. Most construction-friendly MCA funders will pause or reduce the daily for 30-45 days against documented project delays. The wrong move is to stack — a second MCA at the bottom of a cash crunch is the failure path.

The three project-cycle positions and what fits each

Position 1: Mid-project, healthy draw rhythm

The easiest underwriting environment. Bank statements show consistent monthly draws, NSFs are zero or one, the trailing 12-month deposits are clearly growing. MCA quotes come in at the better end of construction range (1.30-1.36 factor, 12-month term).

Position 2: Project transition — one ending, next not yet ramping

The most common reason construction businesses take MCAs. The current project is in punch list and retainage release, the next project is mobilizing but billing is 4-6 weeks out. Bank deposits show a normal compression. Underwriters generally write through this if the trailing 12-month pattern is healthy — but the timing of the application matters. Apply before deposits compress visibly on the most recent 30 days; waiting until the gap shows in statements often costs 10-15 basis points on factor.

Position 3: Long retainage tail with no new work signed

The hardest position. The active project is essentially complete, retainage is outstanding but slow to release, and there's nothing in the pipeline beyond it. Underwriters see this as a structural concern. An MCA at this stage often doesn't fund or funds at materially worse terms. The right answer is usually to focus on lien enforcement to accelerate retainage release rather than taking expensive working capital against a winding-down business.

Construction-specific contract clauses to watch

Beyond the standard MCA clauses (personal guarantee, COJ where allowed, reconciliation, default acceleration), construction-focused MCA contracts sometimes include:

• Project completion cross-default: if any named project on the schedule is cancelled or stop-work-ordered, the MCA accelerates
• Lien priority subordination: the funder may require you to certify no open mechanic's liens against the business and to acknowledge their UCC-1 takes priority over future liens (which is legally questionable in many states)
• Bonded project carveout: for federal and large state projects that require performance bonds, the surety company often takes priority over the MCA. The contract may require you to disclose all bonded projects and exclude their revenue from the underwriting base.
• Sub-contractor MCA exclusion: some funders explicitly refuse to write into a sub if there's an active MCA on the GC of the same project, because of cross-default risk

The four scenarios where construction MCA fits

• Bridge a documented draw delay. Architect is dragging on G702 certification, owner has documented release schedule, gap is 30-60 days. MCA bridges payroll and material payments cleanly.
• Mobilization capital for a new awarded project. Just won a $1M project, need $80K-$150K for mobilization, materials, and first-month payroll before first draw lands. MCA fills the gap if SBA or bank LOC isn't available in time.
• Cover an extended retainage release window. Multiple projects with retainage outstanding, taking longer than expected to release. MCA bridges working capital while you enforce releases.
• Material price volatility hedge. Lock in steel/concrete/lumber at current prices before an expected spike, finance the inventory carry with an MCA, pay it back as projects bill.

When construction MCA is the wrong call

• You have an active SBA 7(a) line that hasn't been drawn — the LOC is meaningfully cheaper
• The "gap" is structural (no new projects in pipeline) rather than timing (specific documented draw delay)
• You're already carrying one open MCA and the combined daily would exceed 8-10% of trailing average deposits
• Your business has multiple open mechanic's liens or pending construction litigation — underwriters will decline and the survivable path is resolving the underlying issues first

What to ask before signing

Four questions specific to construction:

• What's the reconciliation policy specifically for documented project delays? The construction-friendly funders have explicit language. The general-purpose funders sometimes refuse to invoke reconciliation for "normal industry cash cycles."
• Is there a project-completion cross-default clause? Read it carefully — a single cancelled project shouldn't trigger acceleration on the full MCA.
• What does the contract say about future bonded projects? If you're likely to bid on bonded work in the next 12 months, the carveout language matters.
• What's the prepayment treatment when retainage releases land? Some funders offer meaningful prepayment discounts; most charge the full factor regardless. If retainage releases align with the back half of the MCA term, a prepayment discount is worth real money.