Construction industry seasons have long been a cause of concern to contractors and sub-contractors visit this link. Construction factoring gives these individuals and businesses a way to quickly gain access to working capital. Some companies that specialize on construction factoring went as far to completely redesign the system so as to better meet the needs of the industry. Construction Factoring Articles: Where banks hesitate to lend to companies in the construction industry, take on more business with them. Construction factoring generates over a billion dollars of revenue a year.
It’s easy to understand why offering construction factoring can be attractive to subcontractors and construction contractors. Most traditional lending institutions see construction as a risky venture. The nature of traditional lending institutions is to invest only in the most secure businesses. Construction can be a challenging business. If a contractor cannot show that he has a steady cash flow for at least several years, traditional lending institutions will not even consider him.
Construction factoring businesses understand the intricacies and complexities of the construction industry. Construction industry delays and overruns in cost are major factors that can lead to financial problems. Plans change. Weather affects the number of working days. Contractors rarely report that their job is completed within budget. The construction factoring firms are able predict these situations in advance and offer viable financial solutions. The factoring company will purchase your accounts receivable invoices in exchange for a fair factoring charge. The contractor will receive the money needed to buy materials, continue work on the project and pay employees.
Most building contractors lack the financial and physical resources necessary to undertake more than a couple of projects simultaneously. Construction industry is hindered by the high cost of materials and labor. This does not affect other industries. There are many instances where a small company in the construction sector has closed its doors because a project had been delayed, or due to other risks. Construction factoring businesses are specifically designed to work with this industry. Many of them come from construction backgrounds.
Construction factoring won’t change construction as a whole, but can provide the necessary financial support to keep the industry growing. The fees charged by construction factoring companies is higher than that of other industry factoring. The construction industry is a fluid one, and this is why the fees are higher. Construction factoring businesses typically retain a certain amount for any disputes. This is usually between 25-30%. While this rate may appear high, many contractors are willing to pay for the security they receive.