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Construction Factoring

Construction factoring allows subcontractors to finance invoices from commercial clients, general contractors (GCs), and builders. It improves their cash flow and provides funds to pay employees, suppliers, and other business expenses.

Unlike conventional programs, construction factoring programs can handle progress invoices. This feature makes it a compelling option for subcontractors who invoice for project segments.

Commercial Capital LLC offers competitive terms to subcontractors in Canada who invoice a minimum of $100,000 per month. Our factoring program has simple qualification requirements and can be deployed quickly.

Fill out this form to get an instant quote. Call us toll-free at (877) 300 3258 to speak with a representative.

How does it work?

Factoring companies finance invoices in two instalments. The first instalment (the advance) covers 75% to 85% of the invoice (net of retainage). The advance is deposited into your account shortly after the factor processes the invoice.

The second instalment covers the remaining 15% to 25% less the factoring fee. It is deposited into your account once your client pays the invoice on their usual terms. This payment settles the transaction. Most construction subcontractors regularly use factoring because it provides predictable cash flow.

Read “How Does Factoring Work?” to learn more about factoring.

Competitive advances

Having a high advance is important for construction subcontractors. Commercial Capital provides competitive advance rates from 75% to 85%. Advances vary based on the transaction’s risk profile.

Construction factoring advances are generally lower than advances for other industries. This is because construction-related invoices have a different risk profile than conventional invoices.

Construction-related invoices may be subject to progress payments, retention, and other terms. Consequently, they require a higher diligence level from the financing company.

Clear benefits

Construction receivables factoring offers several advantages to companies. These include the following:

  1. Improves cash flow quickly
  2. Works with progress payments
  3. Line adapts to your revenues
  4. Minimizes issues with offering payment terms
  5. Simpler qualification requirements
  6. Can be deployed quickly

Read “Advantages of Using Invoice Factoring” to learn more.

Competitive costs

The cost of a construction factoring program is determined by the size of your invoices, the quality of your clients, and how long they take to pay. Commercial Capital offers competitive rates. Fill out this form for an instant quote. Call us toll-free at (877) 300 3258 to speak with an expert.


Construction factoring programs have two limitations that you should consider. Construction invoices may be subject to “pay-when- paid” or 10% “retention” terms. These terms affect the factoring company’s ability to finance the receivable.

a) Pay-when-paid

Pay-when-paid invoices are typically paid by the GC only when they get paid by the end customer. These invoices can’t be financed unless the GC is willing to waive that clause. Otherwise, the GC could default on the invoice because the end customer did not pay it, and you’d have limited recourse.

b) 10% retention

Construction-related invoices are often subject to a 10% retention which won’t be paid until the project completes. Retention invoices can’t be factored due to their risk.

Simple qualification

Qualifying for construction factoring is simpler than qualifying for conventional financing programs. Construction companies must:

  1. Operate as subcontractors (not GCs).
  2. Have a minimum of $500,000 monthly revenues
  3. Have unencumbered invoices (e.g., PPSAs)
  4. Not have serious tax/legal issues

Is factoring right for you?

Only your finance team can help you determine if factoring your construction receivables is right for your company. In our experience, construction factoring may benefit your company if the following apply:

1. You have reasonable margins

Factoring is more expensive than other financing solutions. Consequently, it works best on transactions that have reasonable profit margins.

2. You invoices pay in less than 60 days

The financing cost increases with time. Factoring works best if your invoices are paid in less than 60 days.

3. Your cash flow problems due to slow-paying invoices

The main benefit of factoring is that it improves cash flow if the problems are caused by slow-paying invoices. This solution won’t help much if your cash flow problems are due to other issues (e.g., profitability).

Need construction factoring?

We are a leading provider of construction factoring in Canada. For a quote, fill out this form or call us toll-free at (877) 300 3258.

Essential reading

We maintain a learning centre with important information to help you make an educated decision about our products. Popular articles include:

  1. How to Choose a Factoring Company?
  2. How to Finance a Building Products Distributor
  3. How to Finance a Commercial Landscaping Business