Construction AR / Retainage Factoring?

investor profile

October 11, 2025

by an investor in New York, NY, USA

We have a $20mm revenue, entirely unlevered project-based commercial subcontractor business. We do work for some of the largest GC's in the US with excellent credit profiles. Part of our customer relationship approach is to not chase checks, which has resulted in our AR and Retainage Receivables being pretty far out - sometimes as much as 180 days. I was interested to understand if there are any logical paths to factoring facilities for this AR / Retainage, that could help us accelerate our cash conversion. We have about $5mm of AR at any given time, and would like to find a way to bring that balance down without becoming a more aggressive partner to our GC customers. Any recs for factoring providers, or other solutions, that could help us with this?
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Reply by a searcher
from The University of Chicago in Nashville, TN, USA
I wouldn't want to give away my margins to a factoring service if I could at all help it. If you want to take the most lenient approach you could consider providing discounts for "early" payment, on a scale that reduces to 0% over time. Others have a "penalty" fee after a given amount of time as well. I do similar business and our office starts reaching out to them for updates on AR soon after the contractual due date at least once per week and we escalate up our chain and theirs as it remains unpaid, culminating in a lien in the worst case scenarios. I wouldn't be shy asking for your money, I can assure you that the other contractors are and that the GC is doing it with their customers.
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Reply by a professional
from Brigham Young University in Calgary, AB, Canada
I like what ^redacted‌ mentioned, you can still provide great customer service and be asking to get paid. The only thing I would add is, to me this becomes a math problem. Find out what your WACC is and that is a good starting point to how much of a discount you could give to incentivize early payment. It will also give you an idea if you were to go the factoring route what is a good deal and what is not.
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