Merchant Cash Advance for Construction Contractors in Texas: 2026 Guide

Construction is a business of fronting money, and nowhere is that more visible than in Texas — the state has roughly 400,000+ construction firms, among the largest small-business categories in the country. A Texas contractor buys materials, mobilizes a crew, and performs weeks of work before submitting a progress draw that then takes 30, 60, even 90 days to pay. On top of that, owners and general contractors hold back 5-10% of every contract as retainage until the project is complete and signed off. So even on a profitable job, a contractor can be deeply cash-negative for months.

That structural gap between spending and getting paid is why construction contractors are frequent users of merchant cash advances. This guide explains how MCAs work for Texas contractors, what protections HB 700 gives you, and when a cheaper tool is the right call.

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Why Texas Construction Cash Flow Is Different

Most businesses get paid close to when they deliver. Construction inverts that: costs hit first and heavy, payment arrives late and in chunks, and a slice of every dollar is held hostage as retainage. The funding gap appears at several predictable points, and Texas contractors feel each one acutely given how fast the market moves.

The mobilization crunch. Frisco, McKinney, Allen, Prosper, Celina, and Anna form one of the fastest-growing residential and commercial construction corridors in the United States. Winning a contract there is the start of spending, not collecting — bonds, permits, initial materials, and crew mobilization all come first. On a 400,000 dollar contract, first-month material and labor outlays can run 80,000 to 150,000 dollars with nothing yet collected.

The progress-draw lag. A submitted draw is not paid money — it is a request that travels through the GC, the owner, the lender, and the inspector before a check is cut. Delays of 30-90 days are normal, and a single disputed line item can hold an entire draw.

Retainage lockup. The final 5-10% of each contract — often the job’s whole margin — stays locked until completion, then frequently slips past the promised release date.

Weather and heat. Gulf Coast storms, flash flooding, and extreme summer heat stall billable progress while fixed costs continue.

An MCA bridges these by funding now and recovering from upcoming draws.

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How MCAs Work for Texas Contractors (ACH-Based)

Construction payments come by check, ACH, and wire, so contractors use ACH-based merchant cash advances — bank-statement or revenue-based programs. The funder reviews 3-6 months of statements, confirms average monthly deposits, and sets a fixed daily or weekly ACH debit tied to those deposits, not to card volume. Under HB 700, a provider is largely prohibited from automatically debiting a Texas business account unless it holds a perfected first-priority security interest — a meaningful change in how collection is structured.

For a contractor averaging 120,000 dollars in monthly deposits:

Advance Amount	Factor Rate	Total Repayment	Daily ACH (~250-day term)
60,000	1.28	76,800	307
100,000	1.35	135,000	540
200,000	1.42	284,000	1,136

These payments are absorbable during active billing months but become heavy the moment a project stalls — the recurring construction risk. Construction contractors typically see factor rates of 1.20-1.50, higher than restaurants or retail because milestone-based revenue is lumpy and weather-dependent.

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Common Use Cases for Texas Construction MCAs

Materials before a draw. Lumber, concrete, steel, and specialty materials must be bought before the work that bills them is performed. A sub might need 40,000 to 150,000 dollars to order materials for a project phase, repaid from the draw that phase generates.

Payroll across the draw gap. Crews are paid weekly; draws pay monthly or slower. A contractor running three crews can carry 50,000 to 120,000 dollars in monthly labor while waiting on payment.

Mobilizing a new awarded job. Bonds, permits, initial materials, and crew mobilization come before the first draw. An advance can fund mobilization when the contract is signed but the first payment is weeks out.

Equipment repair to keep a job moving. A failed excavator or lift can stall a job and trigger schedule penalties. Equipment financing is cheaper for planned purchases, but an MCA can fund an emergency repair within 24-48 hours to keep a crew working.

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What Texas HB 700 Gives Construction Contractors

Texas offers more disclosure protection than Florida, Georgia, or many other states. Under House Bill 700, effective September 1, 2025, every provider must deliver a signed written dollar-cost disclosure before any financing under 1,000,000 dollars — total funds, net disbursement, total repayment, payment schedule, all fees, collateral, and broker compensation. Confession-of-judgment clauses are banned statewide and void where they appear. Providers and brokers must register with the Texas OCCC by December 31, 2026, and each violation carries a 10,000 dollar civil penalty.

What Texas does not require is an APR. A 90,000 dollar draw and an 80,000 dollar advance tell you the dollars, not whether the cost is 60% or 140% APR — repayment speed decides. Use the MCA calculator to convert the HB 700 disclosure figure into an annualized rate. For the full statewide regulatory picture, see the Texas MCA state guide.

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Real Cost Example: Bridging a Progress Draw

A site-work contractor near McKinney averages 140,000 dollars in monthly deposits and is two-thirds through a 500,000 dollar contract. The next 90,000 dollar progress draw was submitted three weeks ago and is expected to pay in another 30-45 days.

Situation: Two payroll cycles (55,000 dollars) and a 30,000 dollar aggregate order are due now; the bank balance is 20,000 dollars.

MCA offer:

• Advance: 80,000 dollars
• Factor rate: 1.34
• Total repayment: 107,200 dollars
• Term: approximately 8 months
• Daily ACH: ~536 dollars per business day

Revenue impact: At ~6,700 dollars in daily deposits during active billing, the 536 dollar payment is about 8% — comfortable. The exposure is delay risk: if the draw slips and billable work pauses, that fixed debit keeps pulling from a thinner account.

Total cost: 27,200 dollars on 80,000 dollars borrowed (34% of the advance). Expensive capital, justified only if the 90,000 dollar draw reliably lands inside the window and the contract margin absorbs the cost.

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Alternatives and Next Steps

Financing Type	APR Range	Best For
Contractor line of credit	10-30%	Recurring materials and payroll gaps
Equipment financing	6-25%	Excavators, trucks, lifts
Material supplier terms	0-low	Stretching net-30/60 on supplies
SBA 7(a) loan	9.75-13.25%	Yard purchase, major expansion
Merchant cash advance	60-200%+ APR	Speed-critical bridge to a near-term draw

For recurring gaps, a contractor line of credit is the right long-term tool; for machinery, equipment financing wins on cost. Use an MCA only when a draw is close and nothing else is fast enough.

1. Tie the advance to a draw — confirm the specific near-term receivable lands inside the repayment window.
2. Demand the HB 700 disclosure and check for any void COJ clause.
3. Compare offers in the MCA provider directory — rates vary 10-20% across funders.
4. Model the impact with the MCA calculator, stress-tested against a 30-day draw delay.
5. Read the full construction playbook at Merchant Cash Advance for Construction Contractors.

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Disclaimer: This guide is for informational purposes only and is not financial or legal advice. Factor rates and requirements vary by provider and change over time. Consult a Texas attorney and a financial advisor before signing any commercial financing agreement.