The construction industry is a lucrative market, but with dwindling funds, the threat of delayed payments and ongoing costs can create chaos for you. And when the cash flow challenges arise, it can take a toll on your business growth. This is the right time to look for small business financing opportunities that can help your business achieve success.
Why Use Construction Factoring?
Construction factoring is the solution that many contractors and subcontractors rely on for funding. The construction industry is known for its complex billing methods that include progress billings, milestone payments, and paid when paid. Often, contractor payments are delayed due to credit terms imposed by general contractors or prime contractors.
These payment terms can easily cause construction companies to run short of cash quickly. This restricted flow of cash can be quite an ordeal for the construction company. That’s why invoice factoring is the easiest way for these companies to get cash and work on growing their business.
Many companies also opt for this option when they don’t have any other choice. If a company doesn’t qualify for a loan and is in need of some urgent funds, construction factoring can help them get the money they need to cover their immediate expenses.
Construction companies that have a high volume of slow-paying invoices are perfect candidates for construction factoring. Most factoring companies deal with businesses that have a term of 15 – 90 days for their receivable debts.
When Is Construction Factoring Needed?
The reasons may differ from company to company, but here are common reasons why construction contractors need factoring services.
- Pay construction suppliers
- Pay employee wages and salaries
- Insurance, taxes and surety bonds
- General office overhead
- Equipment and tools
- Take on additional projects
So what benefits does invoice factoring provide construction companies? Well, here’s a few to consider.
Avoid Bank Loan Covenants
A great hindrance in acquiring funds from banks is the hassle of loan covenants. These can be daunting and put added stress on the business. And the fine print can often not be in your favor. With the help of construction factoring, companies can finance their projects without having to comply with strict requirements. It’s important to remember here that invoice factoring isn’t a loan. The small business financing solution requires you to sell your invoices at a discount and get a instant cash advance in return.
Avoiding or supplementing bank loans can help resolve immediate cash flow issues and assist you in dealing with any existing debts. This is the best way to get some fast cash so you can take care of your construction expenses. By improving the cash flow, invoice factoring helps you keep your loyal customers without having to forego additional projects and opportunities.
Fast and Easy Approval
Small business financing is quite a difficult task, but with the ease of invoice factoring, even this impossible task can be quite easy. Construction companies that have faced disappointment from banks and other financial institutions know about the struggle of acquiring funds for their business. The approval process takes a while. The numerous document submissions and other formalities take up more of your precious time. In the end, all your efforts and time go to waste when the request is rejected. It can be a tiring process, and that’s why construction factoring is such a convenient solution for construction contractors.
Accounts receivable factoring entails selling your receivable assets to meet the operating needs of your business. The best part is that there’s no need to wait for the lengthy approval process. The approval is fast and easy; hence, this is the best way through which construction businesses can fund their new projects.
Unlimited Funding Potential
When dealing with banks or other financial institutions, there’s always a limit to the funds you can acquire. On the other hand, you can usually access as many funds as your receivable assets allow you. The more, the better! Construction factoring provides unlimited funding potential, ensuring that you never have to compromise on the quality or quantity of your construction projects. Even if you wish to acquire funds for day-to-day operations of your business, factoring doesn’t restrict your needs.
Handling the Collection Process
Construction factoring companies often provide additional services to make them more attractive to their clients. One of the most common services they offer is professional credit services and managing the collection process. When your construction company is busy with daily operations, your collection processes often suffer due to lack of attention. With no accountability, your company can end up suffering huge losses in the process. With the help of a factoring company, it’s possible to get your credit back on track and to save money and time that would be spent on the collections.
With so many benefits associated with construction factoring, it’s no surprise that companies have started relying on the service for the smooth running of their day-to-day operations. Whenever there is a need for working capital, accounts receivable factoring is available to help construction contractors get paid quickly. This is the right way to get your construction business the funding it needs to be successful!