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Invoice Factoring for Construction
Any construction business will tell you that the biggest challenge to growing their business is getting paid for jobs fast enough to reinvest the money and get bigger and better projects. Construction businesses will frequently have several outstanding invoices, and the industry is most likely to have higher nets on their invoices than other companies. As a result, many construction firms find themselves owed substantial quantities of money, but with little working capital on hand. Banks are frequently hesitant to provide construction loans, and some construction firms don’t have the time in business or credit history to qualify. The answer for many of these firms is to turn their receivables into cash with invoice factoring.
What is Invoice Factoring for Construction?
Invoice factoring is a financial product that allows construction companies to sell their receivables and get an immediate capital infusion. The factoring service will give initial funding on an invoice, usually between 80-95% of the value of that invoice, and then will pay out the remainder, minus their discount rate, once the invoice has been paid. The result is a rapid injection of capital right when many businesses need it most.
Benefits of Invoice Factoring for Construction
Invoice factoring can provide several benefits for construction companies. The first is that they can get liquid capital quickly without having to wait for customers to pay for services rendered. This allows your company to take on the next big project knowing that you have the resources to see it through. As a result, construction companies can build up their market share and take on bigger and better projects.
Additionally, invoice factoring checks the credit of your customers and clients, instead of the credit of your business. This makes factoring a great option for new businesses or those that have had credit issues in the past.
Another benefit of invoice factoring is that the funding comes quickly. With bank loans there can be escrow periods, paperwork, and other red tape that mean you have to wait for your cash. Business lines of credit work quickly, but establish debt and you may not be able to qualify for them, depending on your business. Invoice factoring by-passes all of these issues and provides fast funding, usually in less than 24 hours.
As you can see, there are some tremendous benefits for construction companies that use invoice factoring. You can get the capital you need and use it how you want to in order to grow your business. Many invoice factoring companies specialize in construction, so check them out and build your business today!