Construction Factoring

Construction is a big business today. Millions of dollars a year go into planning, developing and constructing new homes and businesses. Construction factoring allows new and established companies alike to build revenue in times when competition requires quick investment. In this business, people can take up to ninety days to pay for services, which can negatively affect smaller companies. Construction factoring is similar to regular invoice factoring. Construction companies trade future receivables for immediate cash (sometimes in as soon as two days) that they can use to pay employees, suppliers or subcontractors.

Because construction is such a big-scale field, and there are many smaller companies that start and fizzle yearly, there are some limitations as to which companies can factor. In order to take advantage of construction factoring, a company either has to work with a government agency or through reputable contractors/businesses. Other than that, companies involved in any field of construction can factor, including architects, carpenters, excavators and electrical companies.

Construction factoring can make a difference between success and failure for a business with a seasonal income cycle. At the very least, it can add a predictable income. Factoring can also grow with a construction business, almost serving as a partner to success. Unlike a bank, which limits both how much a company can borrow and how often, a factoring partnership can last years.

The process of securing a construction factoring company is fairly easy and straightforward. A company has to prove that they are financially ready to factor, but this doesn’t rely on their financial position or that of its owners.

Credit rating doesn’t matter, except when it comes to that of the customers. A construction factoring company wants to work with a company that has a reputable clientele, people who pay their debts on time; they also want to work with a company that has potential for growth, and that hasn’t already pledged money to another agency.

The factoring process is much quicker than a normal payment cycle. Factoring clients bill their customers in the same way that they would normally. But instead of waiting to be paid, business owners forward a copy of their invoice to the factor, it is verified and the factoring agent then advances the owner up to eighty percent of the invoice total; the remainder of the invoice (minus a fee) is paid once the customer completes payment.

For more information about construction factoring, government factoring, and invoice factoring, please visit National Invoice Factoring Company.