As the owner of a construction firm, you’ll know just how hard maintaining fluid cash flow can be. Raising finance isn’t a breeze either, particularly if you’re a start-up firm or are small company but growing.
With JCT contracts, applications for payment and staged payments all complicating matters, keeping clients happy while meeting your contractual obligations isn’t always easy. Yet you want to meet your deadlines, grow your business and have a great reputation – so how do you do it?
Two words: construction factoring.
Why Choose Construction Factoring?
Banks are often reluctant to offer loans or overdrafts to construction firms – particularly if you’re a small business without much credit history. You may find some invoice finance firms won’t lend to you as they perceive you as a risk.
So how can construction factoring help? By choosing a specialist funder with experience in the construction industry! You can release the equity tied up in your invoices and application for payments and use it to compete for bigger and better contracts, meeting your obligations to contractors and customers every time.
What Are My Options?
There are two options to choose from when it comes to construction factoring: invoice factoring or invoice discounting. Both options release the funds tied up in unpaid invoices and applications for payment, and up to 95% of the value will usually be paid to you within 24 hours. The benefits of construction factoring include:
- Stable cash flow
- The ability to purchase materials and equipment in bulk at better prices
- The ability to pay contractors and your dues to HMRC on time
- A better reputation with your customers as you can take on new projects before Practical Completion is reached on your current project
- Ability to bid for bigger and better projects as you don’t need to wait for completion
Invoice factoring hands over control of your accounts receivable to the factoring company. This means you won’t be responsible for chasing clients for payment of invoices as everything will be taken care of for you, leaving you free to focus on running and growing your business. There’s no need to worry either, as construction factoring is always completely confidential.
What About Invoice Discounting?
Customer relationships are your bread and butter, so if you want to maintain control of them, that’s understandable. For those who wish to keep track of their accounts receivable themselves, there’s invoice discounting. This gives your construction firm all the benefits of invoice factoring but lets you stay in charge of chasing customers for payment, which is great if you have a ‘small and friendly’ business image or longstanding relationships with important clients.
Choosing A Specialist Construction Industry Factoring Company
Whether you opt for invoice factoring or invoice discounting, it’s important to choose a factoring company with experience in the construction industry. You’ll need specialist help and advice when it comes to dealing with clauses in a construction contract, not to mention applications for payment and JCT contracts.
Using a broker such as Simply Factoring Brokers means you’ll be matched with specialist companies with years of experience in the construction industry, so you’ll benefit from their advice and expertise. They’ll be aware of the challenges you face and can help you with a whole range of issues. You’ll also benefit from the best rates if you use a broker, as they can normally negotiate you a competitive deal.
If construction factoring sounds like a good fit for your company and you’d like to find more – we’re here to help. You can give us a call today on 0330 134 2826, or why not email us at email@example.com?
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