What Is Construction Invoice Factoring for Subcontractors?
Construction invoice factoring allows subcontractors to release cash tied up in unpaid invoices or approved applications for payment.
Instead of waiting for the main contractor to pay, the business receives an advance against the eligible amount.
How Construction Invoice Factoring Works
• Submit an invoice or application for payment
• The funder checks the work and main contractor
• The eligible funding amount is confirmed
• An agreed percentage is advanced
• The remaining balance is released when payment is received, minus fees
The funder may also review certification, retentions, payment notices and any disputed amounts.
Who Can Qualify?
Eligibility can depend on:
• Creditworthiness of the main contractor
• Value and frequency of invoices
• Trading history
• Construction contract
• Whether the work has been completed and approved
• Disputes or deductions
Newer subcontractors may still qualify where they work with reliable customers and have clear payment documentation.
Applications for Payment
Subcontractors often submit applications for payment rather than standard invoices.
The funder may request:
• The construction contract
• The application for payment
• Payment notices
• Evidence of completed work
• Previous payment history
• Details of deductions
Approved applications are generally easier to fund than amounts that have not yet been certified.
Certified and Uncertified Work
Certified work has been formally reviewed and accepted by the main contractor, quantity surveyor or contract administrator.
Uncertified work can be more difficult to fund because the final amount may still be reduced or disputed.
Some specialist funders may consider uncertified work after reviewing the contract, project stage and previous payment history.
How Retentions Affect Funding
Construction contracts often allow the main contractor to retain part of each payment until practical completion or the end of the defects period.
Retentions are normally excluded from the amount available for immediate funding.
Disputed amounts, contra charges and other deductions may also be removed before the advance is calculated.
Main-Contractor Payment Delays
Subcontractors may need to pay wages, suppliers and equipment costs before receiving payment from the main contractor.
Invoice finance for construction can help bridge this gap by releasing funds against eligible invoices or approved applications for payment.
The funding may be used for payroll, materials, equipment hire and other ongoing project costs.
Construction Invoice Factoring Costs
Costs may include:
• Service fees
• Discount charges
• Setup fees
• Minimum monthly fees
• Credit protection charges
The total cost can depend on turnover, invoice value, customer concentration and average payment times.
Common Mistakes to Avoid
• Assuming uncertified work will be funded
• Ignoring retention deductions
• Choosing a provider without construction experience
• Comparing facilities only by price
• Overlooking minimum fees and notice periods
• Providing incomplete payment documentation
How Simply Factoring Brokers Can Help
Simply Factoring Brokers works with specialist UK funders that understand construction contracts, applications for payment and retentions.
Our personalised service:
• Assesses whether your invoices may be suitable
• Compares specialist construction factoring providers
• Reviews likely funding limits and costs
• Identifies funders experienced with subcontractors
• Simplifies the application process
This allows you to compare suitable options without approaching multiple funders individually.