Construction factoring is a financing option for businesses in the construction industry. Instead of delaying work because of slow-paying clients, factoring allows your business to forge ahead, taking on more and larger projects. We examined eight construction invoice factoring companies and compiled our list of the six best for small business owners.
Top 6 Construction Factoring Companies 2020
| Factoring Company | Best For |
|---|---|
(Best Overall) Low rates and no factoring limits from an experienced lender | |
Month-to-month contract with unlimited factoring limits | |
Established businesses needing factoring up to $5 million | |
Newer businesses needing factoring up to $500,000 | |
Factoring for completed projects |
How We Evaluated the Best Construction Invoice Factoring Companies
When evaluating the best construction invoice factoring companies, we prioritized the overall costs of factoring invoices with each lender. We also included the factoring amount, advance rate, and qualification requirements to assist businesses in determining the best provider. Finally, we considered the funding speed and application process for those construction companies needing invoice factoring quickly.
CapitalPlus: Best Overall
CapitalPlus is the best overall construction invoice factoring provider for small businesses based on our criteria. It offers unlimited funding, rates of 2% per month, and will work with construction companies with progress billing and performance bonds. It’s highly regarded by developers, construction company owners, and subcontractors, and has a quick online application with funding as soon as the next day.
CapitalPlus Factoring Rates & Fees
- Discount rate: Up to 2% per month, based on an equivalent bimonthly or daily rate
- Expected APR: 14% to 40%
- Origination fees: None
- Additional fees: Wire transfer fee $25; ACH transfer is free
CapitalPlus charges no origination fees, leading to a simple, all-inclusive fee, except for a wire transfer fee that’s charged by your bank and passed on to you. Depending on your contract, you will have either a daily or 15-day rate for your invoices, with the 15-day rate typically being more expensive depending on the timing of repayment. When you factor $10,000 worth of invoices, you’ll be charged between $3.85 and $10.95 per day.
CapitalPlus Factoring Terms
- Funding amount: $10,000 or more
- Advance rate: 65% to 85%
- Contract term: None
- Type of invoice financing agreement: Recourse; however, some borrowers may qualify for non-recourse if they are well-established
- Repayment term and schedule: Automatically repaid when your invoices are paid
- Lien position: First lien position required
- Personal guarantee: Required
- Speed to funding: As soon as the next day
With CapitalPlus, you must factor at least $10,000 of invoices at a time but, according to a company representative, there is no limit to how much you can factor. You’ll receive between 65% to 85% of the invoice, depending on the creditworthiness of your debtors, the complexity of your contract, and the extent of your relationship with the company.
CapitalPlus Factoring Requirements & Qualifications
- Performance bonds: Accepted
- Progress billing: Accepted
- Pay-when-paid clauses: Accepted
- Clawbacks: Typically no, with some exceptions depending on the contract
- Legal and tax issues: May fund you if the legal issues are minor or your tax debt is currently on a repayment plan
- Annual revenue: No minimum requirement
- Time in business: No minimum requirement
- Business owner personal credit score: Minimal to no credit history required
CapitalPlus is the only lender on our list that is comfortable working with you even if you have a performance bond. It will also accept progress billing, pay-when-paid clauses, and may even work with you to settle tax and legal issues to get you funded. This makes it the easiest lender to qualify for among the best construction factoring companies.
How to Apply for CapitalPlus Invoice Factoring
With CapitalPlus you can apply online, email an application, or print one out, scan, and email it. Once you submit an application, it will ask you to provide any additional paperwork like contracts. You can get funds in your account as soon as the next business day at rates of 2% per month for an unlimited amount of invoices.
Factor Funding Company: Best for Month-to-Month Contracts
The Factor Funding Company is a close runner-up to CapitalPlus that also considers projects with progress billings and pay-when-paid clauses. Factor Funding also has no limit on its factoring facility and its rates are fair, at 3% for the first month and 1% every 10 days after that. It also offers a downloadable PDF application and can get you funded in one week.
Factor Funding Company Rates & Fees
- Discount rate: 3% for the first 30 days, then 1% every 10 days after that
- Expected APR: 40% to 65%
- Origination fees: $400, payable after pre-approval
- Additional fees: Wire transfer fee $25; ACH transfer is free
The initial charge of 3% for the first 30 days is not unusual in the construction invoice factoring industry. However, it can inflate the overall cost of financing if an invoice is repaid in a few days because the full 3% will still be due.
Factor Funding Company Terms
- Funding amount: $6,000 to no stated maximum
- Advance rate: 70% to 80%
- Contract term: Month-to-month
- Type of invoice financing agreement: Recourse
- Repayment term and schedule: Automatically repaid when your invoices are paid
- Lien position: First lien position required
- Personal guarantee: Required
- Speed to funding: Within one week of submitting an application
Factor Funding Company only offers recourse financing agreements, meaning that if your debtors’ default, you will repay the financing. Like other lenders on our list, it requires a first lien position and a personal guarantee.
Factor Funding Company Requirements & Qualifications
- Performance bonds: No, but if you are a subcontractor, the general contractor may be bonded
- Progress billing: Accepted
- Pay-when-paid clauses: Accepted
- Clawbacks: In some circumstances, for businesses with a strong track record
- Legal and tax issues: No
- Annual revenue: At least $72,000
- Time in business: No minimum requirement
- Business owner personal credit score: No minimum requirement
To qualify for construction invoice factoring with the Factor Funding Company, you can’t have a direct performance bond. If you are a subcontractor, your general contractor may be bonded. Factor Funding Company will also work with you if you are on progress billing, have pay-when-paid clauses, and even with clawbacks if your business has a good track record.
How to Apply With Factor Funding
Factor Funding can get you funded with no maximum in about one week. The starting rate is 3% per month with lower rates for subsequent dates. The application process takes a few minutes and a representative will work with you to develop a plan that works.
Working Capital of America: Best for Established Businesses
Working Capital of America (WCA) is another invoice factoring company that offers rates of 3% per month. Its factoring facility is only up to $5 million but it’s willing to consider most complex contracts, including those that have clawbacks. It has no stated minimum annual revenue requirement, but the company typically works with construction businesses with at least $100,000 in monthly revenue.
Working Capital of America Rates & Fees
- Discount rate: 3% per month, calculated daily after the first month
- Expected APR: 45% to 70%
- Origination fees: 0.5% of the funding amount
- Additional fees: Wire transfer fee $25; ACH transfer is free
Construction invoice factoring with Working Capital of America has the same starting rate of 3% per month as the Factor Funding Company. They both have a set rate for the first month. However, unlike the Factor Funding Company, Working Capital of America switches to a daily rate after the first month.
Working Capital of America Terms
- Funding amount: $10,000 to $5 million
- Advance rate: 75% to 80%
- Contract term: At least one year
- Type of invoice financing agreement: Recourse
- Repayment term and schedule: Automatically repaid when your invoices are paid
- Lien position: First lien position required
- Personal guarantee: Required
- Speed to funding: Decision within 72 hours and funding in one to two weeks
Working Capital of America Requirements & Qualifications
- Performance bonds: No, but if you are a subcontractor, the general contractor may be bonded
- Progress billing: Accepted
- Pay-when-paid clauses: Accepted
- Clawbacks: Accepted
- Legal and tax issues: No
- Time in business: At least three months
- Annual revenue: No stated minimum, but clients typically earn at least $100,000 per month
- Business owner personal credit score: No minimum requirement
Working Capital of America does not accept direct performance bonds. However, they will work with subcontractors performing work for general contractors who are bonded. Additionally, like CapitalPlus, it will work with progress billing, pay-when-paid clauses, and even clawbacks. However, legal and tax issues are not OK and, unlike other lenders, there is a minimum time in business requirements.
How to Apply With Working Capital of America
Working Capital of America can get you funded for up to $5 million in about one week. The starting rate is 3% per month, with daily rates after the first month that the invoice is outstanding. You will need to factor invoices for one year with the company and have at least three months in business to qualify.
Visit Working Capital of America
Construction Finance: Best Alternative for Newer Businesses
Construction Finance offers construction invoice factoring that lets business owners borrow up to $500,000 at any time, which is less than other lenders. It’s an alternative for newer businesses due to its low minimum requirements and high advance rate. Construction Finance is also flexible and charges its fees on a 15-day cycle, with most rates ranging from 1.5% to 2%, and funding available within three to five days.
Construction Finance Rates & Fees
- Discount rate: 1.5% to 2% per 15 days
- Expected APR: 45% to 80%
- Origination fees: None
- Additional fees: Wire transfer fee $25; ACH transfer is free
Construction Finance has one of the highest rates for invoice factoring that we reviewed, at 1.5% to 2% per 15 days. This makes it a good option for invoices that will be repaid quickly, but more expensive than the other providers we reviewed for invoices that last 30 days or more.
Construction Finance Construction Factoring Terms
- Funding amount: Under $500,000 outstanding at any time
- Advance rate: Up to 80%
- Contract term: Two years; however, you can end the contract early if there is no outstanding balance
- Type of invoice financing agreement: Recourse, unless the debtor declares bankruptcy
- Repayment term and schedule: Automatically repaid when your invoices are paid
- Lien position: First lien position required
- Personal guarantee: Required
- Speed to funding: Typically three to five days
Construction Finance limits the value of invoices you can factor to $500,000 outstanding at any time. This is the lowest limit among providers we evaluated, making it ideal for smaller construction companies. It also requires that you agree to a two-year contract, although it’s possible to end the contract early if there is no outstanding debt.
Construction Finance Construction Factoring Requirements & Qualifications
- Performance bonds: No, but if you are a subcontractor, the general contractor may be bonded
- Progress billing: Accepted
- Pay-when-paid clauses: Accepted
- Clawbacks: Accepted
- Legal and tax issues: No
- Annual revenue: No stated minimum, but typically at least $120,000
- Time in business: No minimum requirement
- Business owner personal credit score: No minimum requirement
Construction Finance requires that you have no performance bonds, but will work with you even if your general contractor has one. It also works with progress billing, pay-when-paid clauses, and clawbacks, which can make it an accessible lender if your contract is complex.
How to Apply for Construction Finance Construction Invoice Factoring
Construction Finance offers to factor construction invoices up to $500,000 outstanding at a time. Its rates are 1.5% to 2% per 15 days, making it a great option for short term invoices and newer businesses. You can apply entirely online and receive an approval decision in one day, with funding in two to five days.
BlueVine: Best for Completed Projects
BlueVine is one of the newer online lenders on our list, with a quick application and funding speed. It offers up to $5 million but only approves completed construction projects, making it ideal for small business owners who have already finished large construction projects. Rates are charged weekly from 0.25% to 1.35% but, unlike other providers, you’ll need a credit score of at least 530 to qualify.
BlueVine Rates & Fees
- Discount rate: 0.25% to 1.35% per week
- Expected APR: 13% to 70%
- Origination fees: None
- Additional fees: Wire transfer fee $15; ACH transfer is free
BlueVine offers construction invoice factoring to businesses that have already completed a job and are waiting to get paid. It charges rates between 0.25% and 1.35% per week and has an expected APR of 13% to 70%. This makes it one of the least expensive options on our list of factoring companies.
BlueVine Terms
- Funding amount: $5,000 to $5 million per month
- Advance rate: 85% to 90%
- Contract term: None
- Type of invoice financing agreement: Recourse
- Repayment term and schedule: Automatically repaid when your invoices are paid
- Lien position: First lien position required
- Personal guarantee: Required
- Speed to funding: One to three business days
With BlueVine, you can factor up to $5 million per month at an advance rate of 85% to 90%. This is the highest overall advance rate that we reviewed, but the smaller amount of monthly funding can be difficult for larger construction companies. There is no contract term with BlueVine, so you can factor invoices only when it’s needed.
BlueVine Requirements & Qualifications
- Performance bonds: No
- Progress billing: No
- Pay-when-paid clauses: No
- Clawbacks: No
- Legal and tax issues: No
- Annual revenue: At least $100,000
- Time in business: At least three months
- Business owner personal credit score: At least 530
Unlike most of the other providers that we covered in this article, BlueVine does not fund businesses that have not completed a project. This means that performance bonds, progress billing, clawbacks, and pay-when-paid clauses will prevent you from qualifying for funding. Also, unlike the other providers, BlueVine has a minimum time in business and personal credit score requirements.
How to Apply With BlueVine
You can apply online and get funded in one to three days for construction invoice factoring up to $5 million per month with BlueVine. You will need to have an annual revenue of at least $100,000, be in business for at least three months, and have a personal credit score of 530 or higher to qualify. BlueVine only provides factoring for invoices on completed construction projects.
Advantages & Disadvantages of Construction Factoring
Construction invoice factoring offers businesses the opportunity to borrow against money that they’re already owed. This allows them to bid aggressively on projects and provides needed working capital. However, factoring is also expensive, requires your business to assign relationships to the lender, and it can take a long time to get funded.
The advantages of construction factoring are:
- Your business gets access to needed working capital: Getting access to timely working capital can allow your business to maintain a larger workforce to finish projects on schedule. You can also use the increased working capital to pay suppliers early and receive better terms, which can save you money.
- You can bid on larger projects: Knowing you can get access to capital for operations throughout a project, rather than after its completion, can help you bid more aggressively for projects. It can also enable you to expand into more projects when your business is ready.
- It’s easy to qualify: Unlike most forms of financing, most construction factoring companies rely on the creditworthiness of your debtors to determine whether to fund you. This means that business owners with low personal credit scores or those who own smaller and newer businesses can get funding.
The disadvantages of construction factoring are:
- It’s an expensive form of financing: With typical APRs ranging from 30% to 50%, construction invoice factoring can be an expensive form of financing, especially compared with traditional lenders. However, if used to grow your business, pay off suppliers early, and support growth, they can be a wise investment.
- You need to assign customer relationships: Assigning the collection of invoices to a factoring company can often feel like a big hurdle for businesses. However, in some industries, including construction, factoring is common practice and is not looked down upon by debtors.
- It can take a long time to get funded for complex contracts: The more clauses your contract has that increase the complexity of the transaction, the longer it will typically take to get funded. Working with an experienced construction factoring company can often shorten the time, but it can often take up to a week to review paperwork.
The advantages of using construction invoice factoring outweigh the disadvantages if the financing is used to grow your business by hiring staff, paying off suppliers, and bidding on larger projects. If you can qualify for traditional financing from a bank, it can be more affordable for your business in the long run, but it will also take longer to get funded.
Bottom Line
Construction factoring is a great financing solution for construction businesses needing working capital to grow their business. Rather than waiting up to 90 days to get paid, factoring gives businesses a hassle-free way to get the financing needed right away.
