Our goal at Lending Valley is to provide all small business owners access to the best loans possible for their business. You can rest assured we will get you the best rates in the market!
By Lending Valley | Updated for 2025
You just landed the contract. It’s a $500,000 job that will take your company to the next level. You have the crew, you have the skills, and you have the drive.
But there’s a problem.
You need to buy $80,000 worth of lumber and steel this week. You need to put a deposit on a crane. And your crew expects to be paid every Friday. The General Contractor (GC)? They aren’t going to cut you a check for at least 60 days.
This is the “Valley of Death” in construction—that dangerous gap between doing the work and getting paid for it.
In 2025, that gap is getting wider. Recent data shows that the average payment cycle for subcontractors has extended to 57 days, with 77% of subcontractors reporting late payments. If you don’t have a strategy to bridge this gap, you aren’t just losing sleep; you’re losing money.
The two heavyweights in solving this problem are Construction Business Loans and Invoice Factoring. One gives you a lump sum; the other advances your own money. Which one wins?
Let’s break it down—no banking jargon, just straight talk for contractors.
Before we dive into the rates, let’s clarify the mechanism.
A construction business loan is traditional debt. You borrow a specific amount for a specific purpose (equipment, materials, expansion) and pay it back over time with interest.
Factoring isn’t a loan. You are selling your “waiting time.” You sell your unpaid invoices to a factoring company. They give you 80-90% of the cash today, and they collect from your client later.
Expert Insight for 2025:
“Construction businesses are highly dependent on bank credit… The sector has historically operated with long payment times compared to other industries, and this is unlikely to change. This is because the cash flow crunch continues to intensify for certain businesses with heavy working capital needs.” — Matt Nathan, Industry Analyst.
If you are looking for Business funding in Texas to buy a new fleet of excavators, a loan is usually your best bet.
While interest rates have stabilized slightly (30-year mortgage benchmarks hovering around 6.18%), business loan underwriting has tightened. Banks want to see strong “WIP” (Work in Progress) reports and healthy profit margins.
Pros:
Cons:
If you are an electrical sub waiting on a $100,000 check from a GC in Miami, Business loan in Florida options might be too slow. Factoring is instant.
Pros:
Cons:
Not sure which option fits your project?
Speak to a Construction Finance Expert – No obligation, just strategy
Business: Metro Civil Works
Scenario: The company won a bid for a municipal park project but needed eco-friendly excavators to comply with new city codes.
The Challenge: They searched for a Business Loan in Brooklyn. Factoring wouldn’t work because they hadn’t done the work yet—they needed upfront capital.
The Solution: They secured a Construction business loan (Equipment Finance).
Result: They got $250,000 at 9% interest. The monthly payments were easily covered by the project’s revenue.
Lesson: Use loans for assets that generate revenue over years.
Business: Lone Star Drywall
Scenario: A booming housing market meant endless work, but their biggest client (a national homebuilder) moved to Net-60 payment terms.
The Challenge: Business funding in Texas banks were too slow. They needed to pay 40 workers this Friday.
The Solution: They used Invoice Factoring. They factored $50,000 of invoices every two weeks.
Result: They paid a 2.5% fee but kept their crew happy. The cost was built into their next bid as a “carrying cost.”
Lesson: Use factoring to keep labor moving when clients are slow.
Business: Ohio Roofing Pros
Scenario: A storm caused a massive leak on a current job. They needed $15,000 instantly for tarps and emergency materials or risk a lawsuit.
The Challenge: Bad credit (580 FICO) from a previous rough year. Banks said no to Small Business funding in Ohio.
The Solution: They used a Merchant Cash Advance near me.
Result: Funded in 6 hours. Expensive? Yes. But it saved the project and their reputation.
Lesson: MCAs are for emergencies, not daily operations.
| Feature | Construction Business Loan | Invoice Factoring | Merchant Cash Advance (MCA) |
| Speed | Slow (Weeks) | Fast (1-2 Days) | Fastest (Same Day) |
| Cost | Low (8-15% APR) | Medium (1-4% per month) | High (Factor Rate 1.2-1.5) |
| Collateral | Required (Assets) | The Invoice itself | Future Sales |
| Best For | Equipment, Expansion | Payroll, Retainage delays | Emergencies, Bad Credit |
| Credit Score | 680+ usually required | Not critical (GC’s score matters) | 500+ accepted |
Myth: Factoring means my business is failing.
Fact: Smart subcontractors use factoring to accelerate growth. If you can turn your cash over 3 times faster, you can take on 3 times more work. It’s a tool for speed.
Myth: I can’t get a loan because of Lien Rights.
Fact: Lenders actually like lien rights. It secures their position. However, some lenders may ask you to sign a rigorous draw schedule to ensure funds are used correctly.
Myth: An MCA is a loan.
Fact: If you search for “MCA in Newyork”, you are finding a purchase of future receivables, not a loan. It is not subject to usury laws in the same way, which is why rates are higher.
You are searching for “Merchant Cash Advance near me” or “Business funding in Newyork” because you are stressed about cash flow.
Lending Valley is not a bank. We are a marketplace that understands the chaos of construction.
We help you bridge the gap so you can focus on the build, not the bank account.
A: Yes. While traditional banks may say no, alternative lenders offer bad credit contractor loans. These are often revenue-based, meaning approval depends on your monthly deposits, not your FICO score.
A: Most factoring companies will not advance on the retainage portion (the 5-10% held back). They will factor the 90% that is due now. You collect the retainage when the job is closed out.
A: A regular loan gives you all the cash at once. A loan with a draw schedule releases funds in stages (e.g., foundation, framing, roofing) after inspections. This protects the lender but requires you to be organized.
A: It can be safe if used for short-term emergencies (like a broken crane). It is dangerous if used for long-term expenses because the daily payments can drain your operating account.
A: Generally, no. You still have the right to file a mechanics lien if the client doesn’t pay. However, the factoring company may want to be involved in that process since they technically own the invoice.
A: Absolutely. Many GCs use working capital loans specifically to pay their subs on time (Net-15) while waiting for the owner to pay them (Net-60). This keeps good subs loyal to you.
A: Rates are often similar nationally, but regional economic factors play a role. For example, a booming construction market in Texas might offer more competitive competitive “asset-based” lending because the resale value of equipment is high.
When you wait 60 days for payment without a financing strategy, you are essentially giving your client an interest-free loan. You are financing their business with your cash.
Stop doing that.
Whether you choose Construction business loans for the long haul or factoring for the short term, the goal is the same: Project ROI. If paying a 2% factoring fee allows you to bid on a $500,000 job you would otherwise miss, that is a massive return on investment.
Ready to bridge the gap?
[Get Your Construction Funding Quote Today] – Funds available in 24 hours.
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