Why construction receivables are different
A freight bill is a finished thing: the load was delivered, the invoice is the invoice, and the factor collects it. A construction progress billing is not. It represents a slice of a job still under way, so its value can move after you send it — through holdbacks, deficiency claims, back-charges, and set-off — and it sits inside a payment chain where the general contractor's cheque depends on the owner's cheque. That is why many general-purpose factors avoid or restrict construction receivables, and why the ones that fund it underwrite the job, not just the invoice: who the owner and general contractor are, what the contract says about payment, how much holdback is retained, and whether your billings are clean enough to trigger the prompt-payment clocks that now govern most Canadian projects. None of this makes construction unfactorable. It means the factor advances against the portion of the receivable it can count on, and it means the contractor who understands the mechanics gets a better advance, a better rate, and fewer surprises.
Holdbacks: the part a factor will not advance
Outside Quebec — which runs on a legal-hypothec regime with an optional owner withholding instead — every Canadian jurisdiction requires the payer on a construction contract to hold back a share of what you have earned until the lien period runs out. Ontario's Construction Act, Alberta's Prompt Payment and Construction Lien Act, and British Columbia's Builders Lien Act all set it at 10 per cent of the value of work actually done; Manitoba holds back 7.5 per cent, and Prince Edward Island 20 per cent, dropping to 15 once a job's value passes $15,000. That money is legally retained — the payer must keep it — until the lien window has closed: in Ontario, until liens expire 60 days after the certificate of substantial performance is published (or the job is completed or abandoned), with payment due within 14 days after that; 60 days in Alberta, or 90 for concrete work and oil-and-gas well sites; 55 days in British Columbia (dropping to 46 only when BC's prompt-payment law is proclaimed). One recent change matters for long jobs: since January 1, 2026, Ontario requires the owner to release accrued holdback annually on each contract anniversary, rather than holding it all to the end. For factoring, the consequence is direct. The holdback portion of a billing is not collectible when you factor it, so a factor advances against the net invoice — the amount actually payable now — and treats the holdback as a separate, later receivable, if it advances on it at all. Bill with the holdback stated plainly on the invoice and your factor can size the advance correctly on day one rather than clawing back later.
Prompt payment only starts on a proper invoice
Across Ontario, Alberta, Saskatchewan, Manitoba, and federal projects, an owner now has 28 days to pay a proper invoice and a contractor has seven days after that to pass payment down to subcontractors (federally the statute counts it as day 35 from the government's receipt of the invoice) — but the clock starts only when the invoice qualifies. Ontario's definition is the template: a written request for payment that carries the contractor's name and address, the invoice date and the period or milestone it covers, the contract or purchase-order reference, a description of the services or materials with quantities where appropriate, the amount payable and payment terms, and the name, title, address, and phone number of whoever payment goes to — plus anything else the contract itself requires and any information the owner reasonably needs for its accounts-payable system. Ontario also requires proper invoices monthly unless the contract says otherwise, and voids a contract term that makes giving an invoice conditional on prior certification or owner approval (testing and commissioning provisions excepted). Miss an element and the 28-day clock never starts — though in Ontario an owner who does not notify you in writing of the deficiency, and what would fix it, within seven days is deemed to have received a proper invoice. For a factored contractor this is everything: a factor advancing on a receivable that is legally due in 28 days is funding a very different asset than one advancing on a billing the owner can sit on indefinitely. Clean, complete, monthly proper invoices are the single cheapest way to make your receivables factorable.
Trust funds and where the factor sits
Construction money is not ordinary money. Under Ontario's Construction Act, all amounts owing to or received by a contractor on account of the contract price — including holdback — are a trust fund for the subcontractors and suppliers who worked on the improvement, and the contractor may not convert any of it to its own use until they are paid. Other provinces have similar trust provisions. Note the word owing: the trust attaches to the receivable itself, not just the cash, so a factor is stepping into trust property. In practice a factoring arrangement has to respect that structure rather than fight it. The Act does allow trust funds to repay a loan to the extent the lender's money paid for services or materials on the job — but that provision is written for loans, and a factoring advance is a purchase of the receivable, so how a given facility sits against the trust depends on how it is structured. A factor that funds construction will have thought this through; a contractor should ask it to explain exactly how. Ontario also requires trustees to run trust funds through a bank account in the trustee's name with written records — a good factor will expect that discipline, and a contractor who already has it will find the arrangement much easier to set up.
Set-off, back-charges, and lien rights
The invoice a factor buys can shrink. Ontario's Act lets a payer set off, against what it owes you, the balance of any outstanding debts, claims, or damages related to the improvement — and, if you become insolvent, debts unrelated to the job as well; the same set-off can reduce the value of a lien. Deficiency claims and back-charges do the same work commercially even where the statute is silent. Factors handle this in two ways: by verifying the invoice with the general contractor before advancing, and by typically advancing a lower share of construction billings than their published ranges for simpler industries, keeping a reserve to absorb disputes. On the other side of the ledger sit your lien rights, and they are stronger than many contractors realize: in Ontario a lien claimant's rights can be assigned by an instrument in writing, so a factor that buys the receivable can, by agreement, take the lien position that secures it. Lien windows are short — 60 days for a contractor in Ontario and Alberta, 45 in British Columbia — so a factor that knows construction will watch those dates as closely as you should.
What construction factoring companies look for — and how to be fundable
The factor is underwriting your customer's ability and obligation to pay. That means creditworthy owners and general contractors, a contract without a pay-when-paid clause that would let the general contractor hold your money until the owner pays (where prompt-payment law does not already override it), billings that are certified or approved where certification applies, and proper invoices that start the statutory clocks. It also means a clean lien and trust picture: no unpaid subs who could lien the job, trust funds run through the right account, and holdback stated on every billing. Contractors who arrive with those pieces in place get advances on the net billing within days, a rate that reflects the actual risk, and a factor that verifies with the general contractor rather than surprising it. Contractors who arrive with a disputed job and a stack of deficient invoices get declined — not because construction cannot be factored, but because that particular receivable cannot be counted on. Factoring is a tool for the timing gap on a profitable, well-run job; the guide on how contractors cover payroll between jobs and the general explainer on how invoice factoring works fill in the rest of the picture.
Questions operators ask
Can construction contractors use invoice factoring in Canada?
Yes, but with a factor that funds construction receivables specifically. Progress billings carry holdbacks, set-off exposure, and trust obligations that general-purpose factors avoid; construction factors price those in and advance against the net, invoice-able portion of each billing.
Does a factor advance on the holdback?
Usually not up front. The 10 per cent holdback in Ontario, Alberta, and BC (7.5 in Manitoba) is legally retained until the lien window closes — and, in Ontario since 2026, released annually on multi-year jobs — so it is not collectible when you factor the billing. Factors advance on the net invoice and treat the holdback as a later receivable, if they fund it at all.
Why does a proper invoice matter for factoring?
Because prompt-payment law only starts the owner's 28-day clock on a proper invoice — one carrying the name and address, date and period, contract reference, description, amount and terms, and payment address the statute requires. A receivable that is legally due in 28 days is worth more to a factor than one the owner can sit on.
Are factored construction receivables still trust funds?
In Ontario, yes — the Construction Act makes amounts owing to a contractor a trust for its subs and suppliers, and the trust attaches to the receivable, not just the cash. The Act lets trust funds repay a loan used to pay for the improvement, but it is written for loans, not receivable purchases — so ask a construction factor to explain how its facility is structured against the trust.