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The auto industry is getting all the attention in this recession, but the construction industry is quietly feeling the pain too. You hear a lot about “housing starts,” “Sales of new homes” and “Sales of existing homes” when experts are discussing statistics but rarely do you hear a company mentioned by name. It is because there are so many more players in the industry and no single party gets as much attention or have as great an impact as companies like General Motors is for the auto industry. But that does not mean that there are not just as many challenges for builders and contractors both large and small.
One of the main challenges facing the construction industry funding. Credit is tight and there are many builders eager to proceed with the project can not get capital projects get started or current projects are completed. That’s where the construction account factors is necessary and logical choice.
During the project builder, contractor or subcontractor is likely to maintain high levels of receivables. They have performed tasks or even completed the project and are waiting to get paid. These days, every company has to wait as long as possible to pay their bills so based waits up to 90 days or longer to receive payment. At the same time, the builder has costs that must be paid as salaries, maintenance, rent, etc. Getting financing from the bank to keep the company solvent is difficult, to say the least.
However, the fact that outstanding accounts based is to stay relevant and value. Construction invoice factoring allows the builder to use this property to free up much needed cash to pay the costs. After all, it’s all about cash flow, and if the money is not flowing, there is no cash to expire.
Invoice Factoring is the practice of “selling” accounts to companies or individuals named element. The factoring agent provides a builder with a percentage of the nominal value of their accounts, usually 70-90% depending on credit history and credit worthiness of the debt collection companies. Once the bill is finally paid component provides the balance of the amount due less a small percentage for the service. This “fee” or “rate” of 1-5%.
The main advantages of the construction invoice factoring is that the builder or contractor ends with cash in hand quickly, often in 24-48 hours. And the cash that they get is their money, not the money that must be repaid to the bank over time. This allows the building to be current with their debts and buy things, like equipment, that will make their business more efficient and profitable.
Construction invoice factoring has in the past been considered an expensive proposition and action of last resort. But more builders, along with members of many other industries, are reconsidering the value of the power factor. In a tight credit market, invoice factoring is keeping many companies in the business. Even some banks have begun to appreciate the benefits of accounts receivable factoring and departments are starting to offer this service.
Sometimes it takes adversity to highlight previously underappreciated service. And in a recession where much of the focus is on activities in construction, construction invoice factoring has become the financial lifeline for many builders and contractors, both small and large.
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