# 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. The progress payment pattern is the structural reason why construction is the highest-decline industry in generalist MCA underwriting and why a specialist construction MCA niche exists separately. **The standard AIA progress payment cycle.** 1. **Day 1–30.** Subcontractor performs work during the month. 2. **Day 25–30.** Sub submits AIA G702/G703 pay application to GC. Includes percentage-of-completion claim, schedule of values, and lien waivers from lower-tier subs. 3. **Day 30–40.** Architect/owner reviews and approves the pay app. Corrections common. 4. **Day 40.** GC submits combined pay app to owner. 5. **Day 40–70.** Owner pays GC (varies by contract; public works often 30 days, private 30–45 days). 6. **Day 70–90.** GC pays sub under "pay-when-paid" or "pay-if-paid" clause. **Typical sub timeline:** 60–90 days from work performed to payment received. **Retainage overlay.** Most construction contracts hold 5–10% retainage until project completion, paid at substantial completion (could be 12–24 months out for large projects). Subs effectively work at 90–95% cash recognition with the remainder deferred. **Why this breaks daily ACH MCAs.** A sub takes an MCA on Day 1. Daily debit starts Day 2. Cash from work performed during the MCA term doesn't land until Day 60–90. The first 60 days, the sub is funding daily debit from prior-period receivables (if any) or borrowed cash. If receivables run thin (newer sub, recently completed prior project), the daily debit starves the operating account. Payroll for the next project's crew gets squeezed. Sub stops bidding new work to manage cash, revenue contracts, downward spiral. **Specialist construction MCA structures (2026).** Specialist construction funders rebuild the structure around pay app cycles: - **Sized against signed pay apps**, not historical bank deposits. - **Funded amount:** 70–85% of approved-but-unreleased pay app value. - **Repayment:** Lump-sum payoff when pay app releases (typically 30–60 days), or milestone-aligned schedule. - **Factor rate:** 1.08–1.20 for 30–60 day terms — much lower than generalist MCA because the underlying receivable is approved and identifiable. **Pay-when-paid vs pay-if-paid.** - **Pay-when-paid.** GC pays sub within a reasonable time after receiving owner payment. If owner never pays, GC still owes sub (eventually, often via litigation). - **Pay-if-paid.** GC pays sub only if owner pays. Owner non-payment shifts to sub. Enforceable in some states (FL, TX), unenforceable or limited in others (CA, NY). MCA funders check the sub's contracts for pay-if-paid language — it dramatically increases credit risk because owner credit becomes a flow-through underwriting question. **Public works vs private.** - **Federal Miller Act jobs.** Payment bonds required; sub recovery from bond is reliable but typically 90–180 days. - **State Little Miller Act.** Similar; varies by state. - **Private commercial.** Mechanic's lien rights provide collateral but slow recovery; 90–180 days. - **Private residential.** Lien rights weaker (homestead protections); recovery harder. **Mechanic's lien and MCA collateral interaction.** A sub's mechanic's lien on a property typically has priority over the MCA funder's UCC-1 on receivables. Specialist funders address this with: - **Joint check agreements** with GC and owner. - **Direct assignment** of specific pay app proceeds. - **Notice of assignment** to the paying party. - **Lockbox** with the funder collecting pay app payments directly. **Worked example.** A roofing sub completes Phase 2 of a school district contract: $180,000 pay app submitted, approved by architect, district AP cycle 75 days. Sub needs $120K to start Phase 3 (material order + payroll). - Specialist 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, ~45% APR-equivalent. Generalist MCA on same sub would offer $80K at 1.40 factor over 9 months daily debit — cash flow would not survive the first 60 days. **Underwriting documents required.** - Signed AIA G702/G703 for the pay app being bridged. - Architect/owner approval letter. - Master contract showing total project value and payment terms. - Performance and payment bonds (if bonded job). - Last 6 months of bank statements. - Surety credit reference (if available). - Lien waivers exchanged with GC/owner. **Common confusions.** First, "construction is too risky for MCA." False for specialists — pay-app-bridged MCA can be lower risk than generalist restaurant MCA. Second, "construction MCA is just factoring." Similar mechanics but different legal structure — MCA buys receivables, factoring sells specific invoices. Third, "all subs get paid in 30 days." False — net 30 in construction usually means 60–90 days net. Fourth, "retainage doesn't matter for cash flow." It does — 5–10% withheld until completion is real cash deferred. **Takeaway.** Construction progress payment cycles run 60–90 days from work performed to cash received, with retainage extending another 12–24 months. Generalist MCA daily debit structures starve construction subs in the first 60 days post-funding. Specialist construction MCAs structured around signed pay applications with milestone repayment provide a viable alternative at meaningfully lower factor rates. ## Related terms - [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. - [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. - [Merchant cash advance (MCA)](https://fundnode.co/llms/glossary/merchant-cash-advance) — 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)](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-progress-payment-pattern (HTML version) Document: Construction MCA: progress payment pattern — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.