One of the most basic rules when it comes to availing factoring services is that you should partner with a factor which has an extensive experience in your niche or industry. So this means that if you are a flooring subcontractor, you need to approach a flooring factoring company. It sounds simple enough but the reality isn’t exactly in black and white.
Here are some challenges you will face when searching for a flooring factoring company:
- There aren’t all that many factoring companies specializing in the subcontractor niche. Forget about factoring companies which specifically focus on flooring companies. You’d have a difficult time finding a factoring service for any type of subcontractor business. Factoring companies that provide services for flooring companies are extremely rare, so if you find one which has an extensive experience in the flooring subcontractor niche, you can count your blessings.
While you may find a factoring company who may be willing to help you out, their inexperience in your particular industry can make matters more complicated. The contracting industry is complicated, and explaining the details will definitely not be easy.
- What happens if you issue “applications for payment” or payment notices? Inexperienced factors may find it strange if you don’t use invoices at all, but many flooring companies like yours issue applications for payments in lieu of invoices. Since factoring companies use invoices as collateral, by not using an invoice you may have very confused factors which will need a lot of clarification before they can set up a factoring arrangement for your company.
An experienced flooring factoring company, on the other hand, knows precisely why you may want to issue payment notices as a way of reminding people that you need to be paid. What’s more, they also know how to use these payment notices in lieu of traditional invoices as basis to forward you the working capital you need.
- Some main contractors absolutely refuse to deal with factoring companies. In most cases a generic factoring company sends a notice to all your customers that the payments should go directly to them instead of to you. This is SOP, and in some industries (such as the apparel industry) everyone accepts this.
But this is not the case in the contracting industry. The main contractor tends to be someone who likes to deal with subcontractors on a personal basis. The inclusion of a factoring company may be seen as an intrusion, and they may not appreciate having someone they don’t know telling them when and how to pay for your flooring services. There’s a very good chance that this main contractor may no longer use your services in the future if you insist on using a factoring company.
But with a factoring company that has extensive experience in this industry, problems like this has a solution. The entire factoring service can be kept confidential, so that the arrangement can still continue without letting your main contractors know about the arrangement.
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