# 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. Construction MCA proceeds disproportionately flow to material suppliers in the first 5–10 days post-funding. Funders that track this flow — and structure advances around it — can offer materially better pricing than funders treating MCA proceeds as general working capital. **The two pricing tiers.** **Tier 1: Tracked material pass-through (1.16–1.26 factor).** - Funder verifies supplier invoices, may issue joint checks to major suppliers. - Advance proceeds restricted to identified material orders. - Funder confirms material delivery to job site. - Sub provides lien waivers from suppliers. **Tier 2: General working capital (1.30–1.42 factor).** - Funder advances against bank deposits, no proceed tracking. - No joint checks, no supplier verification. - Higher pricing reflects 30–50% higher historical default rates. **Why tracked pass-through reduces default risk.** When MCA proceeds buy materials that get installed in a project: - **Material becomes part of a perfected mechanic's lien** — sub's lien rights attach to the improved property. - **Pay-app reimbursement flows to MCA payoff** through funder assignment or joint check. - **Default risk is essentially GC/owner credit risk**, not sub credit risk. When MCA proceeds get diverted (used on a different project, retained as inventory, used for non-project expenses): - **Lien chain breaks** — funder has no perfected interest in any specific improvement. - **Default risk is sub credit risk** — funder competes with all other creditors in a bankruptcy. The structural difference produces the 30–50% default-rate gap that justifies the pricing tier. **Joint check mechanics.** A joint check is issued by the GC (or owner) payable to both the sub AND the material supplier. Both must endorse to deposit. The MCA funder can require: - **Joint check to the largest supplier** — typically the supplier representing >30% of project material cost. - **MCA funder as third payee** on joint checks (less common; rejected by some GCs). - **Direct supplier payment** — MCA funder pays supplier directly, supplier ships to sub, sub installs. Joint check arrangements add 3–7 days to material order timing but reduce funder risk substantially. **Trade-specific tracking patterns.** - **Roofing (40–55% material intensity).** Funders track shingle pallets, underlayment rolls, flashing inventory. Joint checks to lumber yards and roofing distributors. - **Electrical (30–45%).** Funders track wire spools, conduit, panels, switchgear. Joint checks to electrical wholesalers (Wesco, Graybar, Rexel). - **HVAC (35–50%).** Funders track RTU equipment, ductwork, controls. Joint checks to HVAC distributors (Carrier, Trane, Lennox dealers). - **Plumbing (30–40%).** Funders track copper, PEX, fixtures. Joint checks to plumbing supply houses (Ferguson, Hajoca). - **Concrete (60–75%).** Funders track concrete deliveries, rebar, formwork. Joint checks to concrete plants and rebar fabricators. - **Framing (45–60%).** Funders track lumber deliveries. Joint checks to lumber yards (84 Lumber, Builders FirstSource, ProBuild). **Material price volatility underwriting.** 2024–2026 saw extreme volatility: - **Lumber:** 65% swings. - **Copper:** 15–30% annual swings. - **Steel/rebar:** 10–25% swings. - **Concrete:** 8–15% swings. Specialist funders ask about: - **Price escalation clauses** in master contracts (do material price changes pass through to GC, or does sub eat the change?). - **Lumber/steel hedging** at suppliers (some lumber yards hedge for sub customers). - **Delivery lead times** vs install schedules (long lead times tie up cash before pay-app reimbursement). **Pricing differential worked example.** A roofing sub takes $80K MCA for a $200K commercial reroof. 50% of project cost is materials. **Specialist tracked structure:** - $80K at 1.20 factor, 90-day term. - $42K joint check to roofing distributor for shingles, underlayment, flashing. - $20K direct funder payment to flashing fabricator. - $18K to first-month labor. - Pay app submitted day 35, approved day 55, paid day 80. - Funder receives $200K pay-app proceeds, retains $96K (1.20 × $80K), remits $104K to sub. - Total MCA cost: $16K on $80K (effective ~72% APR-equivalent over 80 days). **Generalist untracked structure:** - $80K at 1.36 factor, 8-month term. - Daily debit $479. - Sub uses $80K however; suppliers paid as cash flow allows. - Pay app collected day 80, sub keeps $200K (no funder assignment). - Sub services $479/day × 80 days = $38,320 in debits before pay app arrives. - High NSF risk weeks 4–10. - Nominal cost: $28.8K. **Specialist funders active in this space.** - **Billd** — material-aware advances, strong supplier integration. - **Levelset Capital** — pay-app and material tracking. - **Procore Capital** — emerging product (2025–2026) leveraging Procore's project management data. - **Some specialty MCA funders** with construction verticals (Reliant Funding construction desk, Forward Financing construction line). **Common confusions.** First, "joint checks always work." False — anti-assignment clauses or GC policy may block joint check arrangements. Second, "tracked material is always cheaper." Sometimes false for tiny advances ($15K and under) where the verification overhead exceeds the pricing benefit. Third, "the supplier always accepts joint checks." Some suppliers refuse — they want clean payment without funder involvement. Fourth, "MCA funder material verification is invasive." It is — funders may require monthly invoice uploads, delivery photos, and lien waivers. **Takeaway.** Construction MCA funders that track material spend through joint checks and supplier verification can offer 30–40% better pricing than generalist funders, reflecting the meaningfully lower default rates on collateral-tracked structures. Subs with $50K+ advances and material-intensive trades (roofing, electrical, HVAC, plumbing, concrete) should prioritize tracked structures. ## Related terms - [Construction MCA: material cost pass-through](https://fundnode.co/llms/glossary/construction-mca-material-cost-pass-through) — Construction MCA advances are commonly used to pre-fund material orders before pay-app release, with 30–50% of advance proceeds going to lumber, steel, or concrete suppliers within 5 business days of funding. Updated 2026-06-28. - [Construction MCA: progress payment funder economics](https://fundnode.co/llms/glossary/construction-mca-funder-progress-payment-economics) — Specialist construction MCA funders advance against pending pay applications at 1.14–1.24 factor with milestone-based repayment, vs generalist MCAs at 1.30–1.45 with daily debit — a 30–40% cost difference driven by collateral quality and structure. Updated 2026-06-28. - [Construction MCA: progress payment bridging](https://fundnode.co/llms/glossary/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. - [UCC filing (MCA)](https://fundnode.co/llms/glossary/uccs-and-mca-liens) — 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. --- Source: https://fundnode.co/glossary/construction-mca-funder-material-cost-pass-through (HTML version) Document: Construction MCA: material cost pass-through funder economics — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.