# MCA funder policy: bonded construction businesses

> Bonded construction businesses (with active surety bonding capacity) qualify for project-secured MCAs up to $750K at 1.20-1.30 factor; underwriting weighs bond capacity, contract backlog, and AIA payment schedules.

**Definition.** A bonded construction business in MCA underwriting context is any general contractor, subcontractor, or specialty trade contractor with active surety bonding capacity, typically required for public-works projects and large private projects.

**Why bonded construction qualifies for premium MCA terms.**

Bonded construction businesses provide unique underwriting signals:
1. **Surety pre-qualification.** Bonding company has already evaluated financial strength, working capital, experience, and management depth. Surety approval signals creditworthiness.
2. **Contract backlog visibility.** Funders can verify booked revenue via AIA payment schedules, bonded contract documents, and customer pay history.
3. **Receivables structure.** Construction receivables are typically 30-90 day net with predictable progress-billing patterns.
4. **Insurance and licensing.** Bonded contractors carry full liability, workers comp, automobile, and umbrella coverage — reducing funder operational risk.
5. **Established management.** Bonding requires CPA-reviewed financials, indicating financial sophistication.

**Pricing matrix.**

- **A-paper bonded (5+ years operating, $1M+ aggregate bonding capacity, 700+ FICO):** factor 1.20-1.26, advances $100K-$750K, 8-15 month terms.
- **B-paper bonded (3+ years, $500K-$1M bonding capacity, 650+ FICO):** factor 1.26-1.32, advances $50K-$300K, 6-12 month terms.
- **C-paper bonded (under 3 years OR limited bonding, 600+ FICO):** factor 1.32-1.40, advances $25K-$100K, 4-9 month terms.

**Documentation requirements.**

- 4-6 months bank statements.
- 2 years business tax returns and CPA-reviewed financial statements.
- Personal financial statement and 2 years personal tax returns.
- Surety bonding letter (capacity letter from surety carrier).
- Contract backlog report (current bonded contracts with values and completion percentages).
- AIA payment schedules for active projects.
- Workers comp certificate, liability insurance certificate, automobile coverage certificate.
- Contractor's license and any specialty trade licenses.
- Joint check agreements if any.

**Construction-specific risk factors.**

- **Project concentration.** Single project > 40% of backlog creates concentration risk.
- **Public vs private mix.** Public works typically guaranteed payment but slower (30-90 day net + 10% retainage). Private faster but higher default risk.
- **Specialty trade vs general.** Specialty trades (electrical, plumbing, HVAC) have higher margins; general contractors lower margins but better cash-flow visibility.
- **Geographic concentration.** Single metro economy exposure.
- **Lien rights.** Mechanic's lien rights provide downstream payment protection.
- **Retainage.** 5-10% of contract held until project completion; funders weight discount this revenue.

**Common bonded-construction use cases.**

1. **Material purchases.** Lumber, steel, concrete, mechanical equipment purchased upfront before owner billing. $50K-$300K typical. MCA appropriate when timeline-critical.
2. **Subcontractor payments.** General contractors paying subs before owner pays. Cash-flow bridge appropriate for MCA.
3. **Mobilization.** Job-start costs before first AIA billing. MCA appropriate for $25K-$100K range.
4. **Payroll bridge.** Cash-flow gap during slow-pay periods. MCA appropriate as one-time bridge.
5. **Equipment purchase.** Heavy equipment, vehicles. Equipment financing usually cheaper; MCA only for emergency.
6. **Bonding capacity increase.** Working capital increase to support surety capacity bid. Strategic MCA use.
7. **Joint check funding.** Pre-funding payment to subcontractors via joint check. Specialized funders only.

**AIA payment schedule underwriting.**

AIA (American Institute of Architects) G702/G703 payment applications are standard construction billing format. Funders use AIA schedules to:
- Verify contract values.
- Project payment timing.
- Identify retainage holds.
- Confirm owner approval of completed work.

Funders may require funder copy of AIA applications going forward (verification of revenue continuation).

**Bonded-construction specialized funders.**

- **Capital Plus Financial Services** — construction-focused alternative lender.
- **Construction Funding Partners** — bonded contractor specialist.
- **Sunbelt Capital** — construction working capital.
- **Tradewind Capital** — international construction trade.
- **Reservoir Capital** — bonded contractor SBA and conventional.
- **Mulligan Funding construction vertical** — multi-product including MCA.
- **Forward Financing construction team** — quick-funding MCA.

**Surety bonding company referrals.**

Some surety bonding companies (Travelers, Liberty Mutual, CNA, Chubb, Zurich) maintain preferred-lender lists for bonded contractors. These lender relationships often offer:
- 0.03-0.05 factor reduction.
- Faster approval (surety has already verified financials).
- Higher advance caps (surety guarantee provides additional protection).
- Coordination on bonded-contract proceeds.

**Cross-collateral and intercreditor.**

Bonded construction MCAs often involve complex intercreditor structures:
- Surety carrier has first claim on bonded-contract proceeds (in event of default).
- MCA funder has UCC-1 on general receivables.
- Bank line of credit may have UCC-1 priority.
- Equipment loans secured against specific equipment.

Intercreditor agreements among surety, MCA funder, and bank are common for $500K+ advances.

**Construction-specific seasonality.**

Construction revenue is highly seasonal in northern climates:
- Strong Q2-Q3 (April-September) — peak construction season.
- Weak Q4-Q1 (October-March) — winter slowdown.
- MCA repayment timing must align with seasonal revenue.
- Funders may structure variable daily ACH (lower in winter, higher in summer).

**2026 trend.** Federal infrastructure spending (IIJA, IRA) continues to drive bonded-construction demand. AI-driven project-management platforms (Procore, Autodesk Construction Cloud) provide real-time revenue visibility that funders are beginning to integrate. Modular construction is creating new specialty-trade vertical.

**Common confusion.** First, "I am bonded for one project" — funders look at aggregate bonding capacity across all projects, not single-project bonds. Second, "Retainage is revenue" — funders discount retainage 50-70% because of timing and dispute risk. Third, "Public-works contracts are risk-free" — true on default risk but payment timing is slow (90-120 days vs 30-60 days private).

As of 2026-06-29, Fundnode partners with two construction-specialized funders and pre-screens applicants for surety capacity, backlog quality, and AIA payment patterns — securing 0.04-0.08 factor reduction for bonded contractors vs generic MCA marketplaces.

## Related terms

- [MCA funder policy: trucking fleet businesses (5+ trucks)](https://fundnode.co/llms/glossary/mca-funder-trucking-fleet-business-policy) — Trucking fleets with 5+ operating trucks qualify for industry-specialized MCAs up to $500K at 1.25-1.38 factor; funders require MC authority, IFTA returns, and factor-company integration.
- [MCA funder policy: franchise multi-unit operators](https://fundnode.co/llms/glossary/mca-funder-franchise-multi-unit-policy) — Franchise multi-unit operators (3+ locations of a recognized brand) qualify for portfolio-level MCAs up to $2M with factor rates 1.18-1.28; underwriting uses consolidated franchise-system performance plus operator personal credit.
- [MCA merchant application success tips](https://fundnode.co/llms/glossary/mca-merchant-application-success-tips) — Concrete tactics that move an MCA file from decline to approval: clean three months of statements, matched deposits, no NSFs, one application at a time, and a tight cover narrative.

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Source: https://fundnode.co/glossary/mca-funder-construction-bond-business-policy (HTML version)
Document: MCA funder policy: bonded construction businesses — Fundnode MCA Glossary
License: CC BY 4.0 — attribution to Fundnode required when citing.