Best Construction Factoring Lenders: Receivables & Invoice Factoring

What Is Construction Factoring?

Construction Factoring is a type of funding that gives a business access to a percentage of the values of their invoices before they have been paid by the customer. Construction invoice factoring is suitable for use by any construction company or contractor, or companies who cannot qualify for other types of loans and use invoices to request payment from their customers. Although a convenient solution when you need cash-in-hand as soon as possible, it can be very costly for a business.

What Is Invoice Factoring?

Invoice Factoring is the same as construction factoring, but is the term used across all industries. Invoice factoring a good way for small businesses to have a consistent cash flow, as long as they earn more than $25,000 through invoicing their customers. Construction Factoring Companies purchase unpaid invoices at a discount so that the business owner can get an advance on the amount owed to them by the customer. The Construction Factoring Companies then take-over the collection of the outstanding amount from the customer.

How Invoice Factoring Works

Here’s an example of invoice factoring: say you worked on 5 new homes for a development company, and you offer a 30-day payment cycle. If they say they will take 45-days as policy, but you need the money sooner, you don’t have to wait for them to pay on their terms. Instead, you essentially “sell” the invoice (or debt) to an invoice factoring company. This company will pay you 80% of the bill then and there, giving you access to the money when you need it.

Then, once the customer has paid their outstanding invoice, the factoring company sends the remainder of the money due on to you, with their fees taken out.

Why Get Construction Invoice Factoring?

There are several reasons why a small business may choose to exploit Construction Invoice Factoring:  

  • Payroll – paying employees is very important if you don’t want to lose them
  • Equipment rentals – the right equipment is vital for many businesses, but it is often very expensive
  • Insurance – this is crucial for protecting a business in the case of legal disputes or accidents
  • Fees – assistance with business contracts and other documents is likely to incur legal fees, or you may have fees to maintain locally mandated certifications such as relevant licenses
  • Extra capital – covers costs of hiring new staff, purchasing work vehicles, expansions, marketing, and any unexpected costs
  • Unpaid invoices – generally bills to keep your business running, i.e., building rent, water, and electricity

What Are The Best Construction Factoring Companies and Lenders?

There are two lenders we recommend for construction factoring:

BlueVine – BlueVine offers construction factoring with upfront advances of 85% to 95% of the invoice, for amounts between $20,000 and $5 million. Depending on how long the invoice has been outstanding for, BlueVine set repayment terms anywhere from 1 to 13 weeks, with interest rates of 15% to 68%. Their construction factoring rates will be determined by the quality of your invoice and your creditworthiness, but will be a weekly discount somewhere between 0.4% and 1%.

To qualify for construction factoring with BlueVine, you need to have annual revenue of at least $100,000, have a personal credit score of 530 or above, and have been in business for at least 3 months.

Invoice Factoring
Loan Amounts $20,000 to $5 million
APR Range 15% to 68%
Repayment Terms Up to 13 weeks
Time to Funding N/A
Click “Check Rates” to apply to Blue Vine

FundBox – FundBox is a little different from other lenders, as they allow you to keep control over your customer collections, where most others do not. They offer invoice factoring advances of up to 100% of your invoice, of amounts between $1,000 and $100,000, with repayment terms of 3-6 months. FundBox offers interest rates of 10.1% to 79.8%, and they may be able to give you an advance in as little as 24 hours, with weekly discount rates of the value of your invoice at 0.5-0.7%.

FundBox bases their decision on how likely it is that your customers will pay you, rather than your credit score, so they have no minimum personal credit score requirements. You will, however, need to have been in business for at least 6 months, and you will need to use specific accounting software, which will allow your finances to be synced with your FundBox account.

Invoice Factoring
Loan Amounts $1,000 to $100,000
APR Range 10.1% to 79.8%
Repayment Terms 3 to 6 months
Credit Score No minimum personal credit score required
Time to Funding A few minutes to several days
Click “Check Rates” to apply to FundBox

What Is The Cost of Construction Receivables Factoring?

Construction receivables factoring usually has fees ranging between 1% and 4% per invoice per month. However, the actual costs are determined by the invoice value, the rate of advance, and the fee schedule, along with other costs outlined by the lender. These could include prepayment, origination fees, or late fees.

Can Subcontractors Use Invoice Factoring?

Factoring for construction subcontractors is much the same as it is for contractors. However, being a subcontractor will lower your chances of having access to construction financing if you haven’t taken the time to get documents and financials in order before you apply. You need to have an appropriate business checking account with well-organized finances, both personally and in business, to have a better likelihood of approval from potential construction factoring companies.

Advantages and Disadvantages of Construction Factoring

As with all borrowing, there are both advantages and disadvantages to construction factoring.


  • Construction factoring gets you money upfront – you can access a percentage of the value of an unpaid invoice earlier than you would have been able to before
  • Invoice collections are carried out by the factoring company – this means you don’t have to worry about chasing customers for payment yourself. Once the invoice has been sold, it is down to the factoring company to get payment from your customers


  • High costs – as construction invoice factoring is only provides funding short-term, the interest rates are extremely high, especially when compared with the alternatives – although you have upfront cash-in-hand, you’re losing a big chunk of money in a very short time frame because of the high APRs
  • You have no control over customer billing – the factoring company will be the ones to contact your customers to fulfill their invoice which will mean that you will have no control over how this money is collected, and your customers will know that you have had to make use of construction factoring which could reflect negatively on your business

What Are Alternatives to Invoice Factoring?

If construction invoice factoring doesn’t seem like the right way to get funding for your business, there are several alternatives you can consider instead.

SBA Loans

Small Business Administration Loans, or SBA Loans, are backed by the government and give small business owners access to loans of up to $20 million, with relatively low interest rates of 4.99% to 10.25%. These types of loans are generally used for working capital, refinancing, or for making large purchases such as real estate or equipment. Repayment terms typically range from 10 years to 30 years. SBA loans, however, are hard to qualify for due to the many requirements set out by lenders and the SBA itself. You will need to have been in business for at least 2 years, with a personal credit score above 680.  

Compare SBA Loans

Equipment Loans

If you are simply looking for funds to purchase new equipment, you should think about an equipment loan. This will allow you to buy the equipment you need for your business to grow, and the equipment itself will be used as collateral so you do not have to worry about losing personal assets if, for any reason, you cannot make the repayments. Interest rates for equipment loans range from 8% to 30%, with repayment terms of up to 5 years, although this will depend on the lifespan of the equipment you wish to purchase. You are much more likely to qualify for this type of loan, and you have access to up to 100% of the equipment value, which is probably more than you would get through construction funding.

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Term Loans

There are two types of term loans available to you, short-term loans or long-term loans.

Short-term loans are best used for a one-time expense, such as emergencies or business opportunities, although they are also commonly used for cash flow purposes and operational costs. Short-term loans typically offer amounts ranging from $1,000 to $250,000 and have interest rates between 8.5% and 80%. Repayment terms can be anywhere from 3 to 18 months, paid daily or monthly, and you may even get funding in as little as 1 day.

Long-term loans, however, are generally cheaper due to lower APRs. This type of loan is perfect for established businesses and a business owner with an excellent personal credit score of 650 plus. Long-term loans typically provide amounts ranging from $5,000 up to $500,000, but some lenders will offer amounts in the millions. Interest rates range from 4% to 30% with repayment terms of 1 to 25 years, and some lenders will fund quicker than others, so you should do your due diligence to determine which loan and lender is right for you and your business.  

If you choose to borrow with a business loan instead, always compare lenders and terms to ensure you’re getting the best rates. We’ll compare the best business loan options for you, so you don’t have to spend hours doing your research.

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