The project was funded. The draws were delayed. The MCA was taken to bridge the gap. The gap never closed because the daily withdrawal consumed the draw before it could fund the next phase.
Construction contractors are heavily represented in the MCA borrower pool because the industry’s cash flow structure is fundamentally mismatched with the MCA’s daily withdrawal model. Construction revenue arrives in draws — periodic payments tied to project milestones. Construction expenses arrive daily — materials, labor, equipment rentals, subcontractors, insurance, permits. The gap between expenses and draws is the space where MCA funding enters, and it is the space where MCA funding causes the most damage.
Why Construction Is Particularly Vulnerable
Construction cash flow is project-driven, irregular, and subject to delays that are outside the contractor’s control. A draw that is delayed because the inspector is backed up, the architect has not approved the change order, or the owner is slow to process the payment creates a cash flow gap that the contractor must bridge. The MCA fills the gap, but the daily withdrawal does not pause while the draw is delayed. The contractor is paying the MCA with money that does not yet exist.
Seasonality compounds the problem. Many contractors in cold-weather states experience significant revenue declines during winter months when outdoor work stops or slows. The MCA’s daily withdrawal does not adjust for seasonality. The payment that was sustainable during a busy summer becomes unsustainable during a slow winter.
Subcontractor and material costs are front-loaded. The contractor pays suppliers and subs before receiving the draw that reimburses those costs. The MCA withdrawal competes directly with these upfront payments. When the daily debit takes priority over a material supplier’s invoice, the supplier places the contractor on COD or refuses to supply. When the debit takes priority over a subcontractor’s payment, the sub walks off the job. The project stalls. The draw is delayed further. The cycle accelerates.
Industry-Specific Challenges
Construction contractors face unique challenges because their revenue is project-specific and their assets are often project-specific as well. The MCA’s UCC lien may encumber not only the contractor’s general business assets but also equipment, vehicles, and receivables from specific projects. This encumbrance can interfere with bonding requirements, contract compliance, and the contractor’s ability to bid on new work.
Bonding companies review the contractor’s financial position before issuing performance and payment bonds. An MCA lien on the contractor’s assets signals financial stress that may reduce bonding capacity. Reduced bonding capacity means the contractor cannot bid on bonded projects, which limits revenue, which increases the MCA’s burden relative to the contractor’s income. The lien impairs the very capacity the contractor needs to generate the revenue to pay the MCA.