Contractors and subcontractors have been concerned about the seasons in the construction industry since the beginning. Construction factoring provides these companies and individuals with a solution that allows them to obtain working capital instantly. Many construction factoring companies went so far as re-designing the system to suit the specific financial requirements of the construction sector. Construction factoring Articles can help you take on more work when banks are reluctant to lend money to construction companies.
This makes it easy to see why construction factoring is attractive to contractors and sub-contractors. Traditional lending institutions tend to view construction as a high-risk business. These financial institutions are trained to invest only in secure business opportunities. Construction is an extremely difficult industry and lenders won’t even consider the prospect unless the contractor can prove that they have a consistent cash flow for several years.
Construction factoring companies understand and acknowledge the intricacies of the construction sector. The construction industry’s time delays and cost overruns can be a major factor in financial hardship. Plans change and weather conditions can affect working days. It is rare for a contractor to say the job has been completed and is under budget. These companies are able to anticipate and provide viable solutions. Construction factoring firms purchase accounts receivable for a reasonable factoring fee. The contractor gets the cash he needs to pay for materials and continue working on a project, as well as pay his employees.
Most contractors are not able to manage more than a handful of projects at once, either financially or physically. Materials and labor costs are prohibitive for the construction industry, but not other industries. A small construction company can go out of the business because of a delayed project or other risks in the construction industry. Construction factoring companies specialize in this industry and are usually from the construction industry.
Construction factoring is not able to change the nature or the construction industry. However, it can provide financial resources for the industry to continue expanding and growing. It is said that construction factoring fees are higher than other factoring services. All of this is due to the ups and downs of the industry. Construction factoring firms typically hold back a certain percentage to cover any disputes, usually around 25-30%. Although this may seem like a steep rate, most construction contractors would be happy to pay it for the peace-of-mind that is afforded.