Have Slow Paying Clients? Try Construction Factoring
If you work in the construction industry, you have likely already had several issues with slow-paying clients. Construction projects can be very lengthy and complicated endeavors that require extra patience and flexibility when it comes to receiving payments. This can make it very difficult for you to be approved for traditional bank loans. Without a loan, where will you find the cash to begin your next project, make it through a slow season or pay your employees on a regular schedule? One excellent option, when done correctly, is construction factoring.
A factoring company will buy your unpaid invoices from you, which means you can receive your payment within a period of days rather than months. You get a significant chunk of the money owed to you upfront and then once your client has paid, you will be given the rest of what you are owed minus a factoring fee, which is negotiable but usually runs from two to six percent. Once your invoice has been sold to a factoring company, they will be responsible for issuing liens and enact any other protective measures necessary to ensure that your payment will arrive within a reasonable amount of time.
People working in the construction field are going to need to put some extra effort into finding a service that specializes in construction factoring. The delayed payment schedule of the construction industry may cause you trouble with your factor if they do not have experience working with people in your field. Construction has a chain of payment, which often means that your company will not get paid until the general contractor has been paid. This makes it difficult to estimate when payments will arrive, which causes problems for traditional lenders and bank loans. Factors who regularly work with construction companies will already know how to handle the difficulties of this payment structure. Also, because progress payments are so common in construction contracts, ask your factoring company upfront if they will be able to accept them.
Large projects can be very profitable for construction contractors and subcontractors, but they often require a significant amount of money upfront for supplies, payroll and other necessities. Developing a good relationship with a construction factoring company can really improve your peace of mind as well as your ability to accept more work and maintain a happy staff. A good factoring company has all of the experience and knowledge about the construction field necessary to make sure everyone gets paid in a timely manner.