Construction Factoring For Subcontractors
All to often, subcontractors run into cash flow problems. The main reason for this is subcontractors are hire on as part of a larger construction contract. After the subcontractors are finished with their jobs, they typically have to wait until the entire project comes to completion before they get paid. This means subcontractors can find themselves waiting 30,60,90, even 120 days before payments are sent out. To eliminate this waiting period entirely and collect the revenue owed, subcontractors have started using construction factoring.
An Overview Of Construction Factoring
Construction factoring is the direct sale of open invoices to a commercial finance company for working capital. A construction factoring agreement can be arranged in 48 to 72 hours for qualifying subcontractors. Once the agreement is signed, any open invoices, even if they are from subcontracting projects instead of direct customers, can be submitted and converted into cash for amount due (minus a small processing fee) with a 24 hour period. This gives subcontractors the ability to receive payment quickly for all completed jobs, as well as the freedom of taking on multiple jobs at once without worrying about a strain on cash flow prohibiting business owners from being able to pay for labor and other expenses. In fact, the fast turnaround on open invoices gives subcontractors the ability to amass growth capital to acquire new equipment, hire more employees, and expand operations to land even larger jobs.
Construction Factoring Is Debt Free
Construction factoring is used as an alternative to bank loans. There was a time when subcontractors would take out loans – and place debt on the balance sheets in the process – to get capital to keep their operations from going into the red. The problem with this solution is that even when the loan money is used to pay employees and other business expenses, there is still debt and interest which needs to get paid off over the following years, which only compounds problems when the same situation crops up again when there is a delay in payments and a strain placed on cash flow. By contrast, construction factoring is a sale on receivables. There is no debt created and no credit checks required for qualification.
If you are a subcontractor, and you are tired of waiting for payments on open invoices, call CounselPro Lending at 1-888-292-3322. We specialize in debt-free financing solutions for construction businesses and subcontractors.