Construction Factoring and Subcontractors face many challenges in today's competitive construction industry. Covering payroll and having enough cash on hand are two of the biggest challenges that factor financing can help with.
Contractors run very lean and efficient operations with low margins and don't always have large amounts of cash in reserve during certain phases of a build. Most general contractors and commercial customers don't pay outstanding invoices for 45 to 65 days.
When you combine industry strains such as slow-pay accounts, large payroll and supply overhead, you start to see how subcontractors involved in several projects could get over-extended and need additional access to cash flow to sustain and grow their business efficiently. Not being able to access cash that's tied up in your accounts receivables could even cause you to close your business.
What can you do:
There is always the idea of trying to get a local bank loan. You could visit the bank and try to get approved for a loan or line of credit. However a business loan from a bank takes months and may be too late to help your cash flow crunch right now. There's also the fact that many financial institutions like banks are skeptical of lending to companies in the construction industry. You may end up qualifying for bank funding if you can satisfy their lending criteria; two-three years or more of successful profits backed by your tax returns or business banking account history. You may also be required to provide substantial collateral before being considered for approval. If you don't have months to wait to see if you may or may not get approved, you may want to check out factor financing as an alternative.
You could Ask your clients to pay faster is always a challenge and most likely not going to happen. Invoice financing offers your business an easy way to finance and grow your construction business using assets you already have, you're accounts receivable invoices.
Finance your invoices for immediate cash. For most contractors cash flow gaps are not due to the fact that your company doesn't make money. Rather, the issue lies in the time it takes to collect on slow-paying accounts that you've already completed work for.
Factoring your invoices will get you the funds you need to pay suppliers, employees and take on more new business customers.
How Construction Factoring Works:
Transactions are structured with payments in two installments. You get an upfront advance and a rebate for the rest of the invoice once the invoice is paid in full. Follow these few simple steps to get started;
When you're looking for the best deal and most competitive offers from factor finance companies looking to buy your invoices, be sure to click the Submit Invoice button to get started receiving competitive offers for your outstanding invoices from finance companies that specialize in the construction finance industry.
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