What is roofing contractor payroll funding and how does it work, including costs?

Roofing contractor payroll funding is a form of invoice factoring that advances cash against your unpaid customer invoices so you can pay crews now instead of waiting 30 to 90 days for clients to pay. A funder typically advances 80% to 95% of an invoice's value within 24 to 48 hours, then releases the rest minus a small fee once the customer pays. It converts receivables into immediate liquidity without adding a traditional loan to your books.

The core problem it solves is a timing mismatch: roofing crews get paid weekly or biweekly, but commercial clients and GCs often pay on net-30, net-60, or net-90 terms. Payroll funding closes that gap so a slow-paying invoice never forces you to miss payroll or turn down the next job.

How the mechanics work

You complete a job and issue the invoice. The funder verifies it and advances most of the face value upfront. Advance rates generally run from 80% to 90%, and some funders go up to 95% for high-quality receivables. The remaining balance (the reserve) is held back and paid to you once your customer settles the invoice, minus the factoring fee. Because the advance is money your clients already owe, factoring doesn't show up as debt the way a term loan does.

What it costs

The main cost is the factoring fee (also called the discount rate), typically 1% to 5% of the invoice value per 30-day period, scaled to how long the invoice stays unpaid. Construction-related invoices sit at the higher end — roughly 2.5% to 5.0% per 30 days — because of longer payment cycles, retainage, and dispute risk. Watch for add-ons that raise the effective cost: origination fees, ACH/wire charges, monthly minimums, and early-termination penalties. Factoring fees are quoted as a discount on each invoice rather than as an APR, which is how cheaper asset-based lines are priced, so compare the all-in cost carefully.

Your options

• Invoice factoring / payroll funding — fastest path to covering weekly wages against open invoices; advances of 75% to 95% and funding in 24-48 hours.
• Working capital loan or business line of credit — a revolving cushion you draw on for payroll during weather delays or off-season dips, not tied to specific invoices. See our guide to roofing contractor working capital.
• Asset-based lending — for larger operations, often lower-cost than factoring because it's priced as an APR, but with stricter qualification.

For a step-by-step on the factoring mechanics specific to roofing, see how invoice factoring works for roofing businesses, or our overview of payroll funding for roofing firms.

Sources

• altLINE (Southern Bank) — Invoice Factoring Rates Explained
• FundThrough — Invoice Factoring Rates
• Crestmont Capital — Invoice Factoring Rates & Fees Breakdown
• United Capital Source — Payroll Factoring
• U.S. Small Business Administration — Asset-Based Lending