How can factoring help my construction business grow?
Factoring gives your construction company the cash injection it needs.
Banks avoid construction like the plague. Applications for payment, contractual agreements and irregular revenue are all red flags for traditional lenders.
Why is construction factoring different?
Factoring provides a fluid finance. Raise an invoice in the morning and get paid in the afternoon.
This gives your company vital resources to:
- Take on larger contracts
- Finish existing jobs on budget
- Make purchasing decisions, which are only available when you have positive cashflow.
How does construction factoring work exactly?
Construction factoring allows you to sell your outstanding invoices and obtain almost-instant cash.
For example – you could receive up to 90% of the invoice value within 24 hours then receive the remaining 10% minus fees upon settlement of the invoice.
There are a number of ways factoring can help your construction business grow:
- Eligibility for Funding
In the factoring process, the creditworthiness of the invoice debtor is the party under scrutiny. This means start-ups and companies with little or adverse credit can get a funding facility without a business plan. All you need is a paper trail or invoice method that you can explain to a finance company.
- Speed of Funding
In a normal construction project, payment is generally phase-by-phase. They sometimes involve applications for payment when a quantity surveyor is satisfied that the work. This could take four weeks or four months depending on the job. With a factoring facility, you can get up to 90% of your application value within 24 hours.
The size of your credit line will grow with the size of the work you undertake. A factoring facility develops in direct proportion to your company’s growth, unlike a bank loan, which limits your growth based on your credit history.
You can also choose to factor some or all of your business’ invoices.
A loan is a fixed, long-term commitment and regardless of how business is going, your repayments remain the same. Factoring gives you greater control over your outgoings. The fees you pay rise and fall based on your success.
- Cut operating costs
Factoring allows you to outsource your accounts receivable department and credit control management. Enabling you to cut recurring cost of staff, free up your own time or grow without recruiting extra admin personnel. This allows you and your staff to concentrate on running the business.
Regular cashflow gives your business options:
- Negotiate better supplier quotes
- Fund expansion plans
- Pay staff on time
- Hire and retain better staff
- Take on larger contracts
If you want more information on how invoice factoring could improve cashflow within your construction business, give us a call today.
After our initial conversation, we can assess your needs and arrange a factoring facility, which is the perfect fit for your business needs. We have a dedicated team waiting to take your call and as we are an independent brokerage, we can guarantee you the best available rates.