Tag: Sub-Contractor Factoring

Financing Construction Invoices for Sub-Contractors

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Nowadays, financing construction invoices for sub-contractors is an increasingly popular option. Usually this kind of financing is used to boost a company’s working capital, and that’s because the payments and the expenses don’t match up.

Sub-contractors need to pay their workers on a weekly basis, and they need to cover overhead as well. For every project they have, they also have to cover the costs of supplies as well as the rent for equipment. But it’s very common for sub-contractors to receive an invoice instead of cash, with the payment from the general contractor or client coming in after two whole months of waiting.

How It Works

While in some cases financing construction invoices for sub-contractors means receiving a loan with the invoices as collateral, that’s not usually what happens. After all, loan applications still take too much time. Sub-contractors have to present several years of profits for lenders, and they need to have an excellent credit history. For many subcontractors, these requirements simply can’t be met especially when the sub-contractor is new to the business.

What happens is that the finance company essentially purchases the invoices. The subcontractor gets 80% of it in advance (the exact percentage may vary depending on the agreement), and that money can then be used for their needs. Meanwhile, the finance company monitors the invoices and handles the collection. Once the general contractor or the client pays in full, the factoring company deducts the fees from the payment and gives the rest to the subcontractor.

Advantages over Other Forms of Financing

With this type of financing, the sub-contractor enjoys several advantages. Perhaps the most crucial here is that the chances of getting the additional funding are much higher. That’s because the credit history of the sub-contractor is irrelevant. Processing a funding application can take just a week or two, and afterwards the money can be forwarded in a day when the invoice is received.

This is in stark contrast to dealing with banks. It’s also much better than dealing with credit card companies, which may not be able to provide the amount the subcontractor needs. What’s more, credit card companies can charge interest rates so high that they can seem almost criminal. The fees commanded by factors are much lower.

Another advantage is that the sub-contractor is spared from having to monitor the invoices and making the collections. These tasks are already part of the factor’s services. There’s no need to hire additional personnel to handle these jobs. The subcontractor can concentrate on completing the current projects and searching for new ones.

Finally, the factor also investigates the credit of potential clients. This can help the subcontractor make informed decisions regarding taking on a new client, who may or may not have a good history of making payments. And when the subcontractor does take on a new project, they have the working capital to use for supplies and rental equipment.

With financing construction invoices for sub-contractors, operations are smoother and opportunities for growth can be seized.

Sub-Contractor Factoring Is Tough | We offer Sub-Contractor Factoring

Sub-Contractor Factoring
Sub-contractors can make payroll and pay their suppliers without the need for a loan. An invoice factoring plan can be just the right solution for you or your newly budding construction company.

Sub-contractor work can be tough if you don’t have the right sub-contractor factoring company to help you out with your business and financial obligations. Making payroll accounts and paying suppliers can be a financial strain on the business, and it can be almost impossible when you have to wait one to three months to get paid for a job you’re doing.

 

The scenario is pretty common in most industries, and it is especially common when a small or mid-sized sub-contractor doesn’t have enough cash reserves to float the payroll or purchase supplies or equipment. It might slow the business down to an absolute halt. That can be really tough on the business for sure, and it might make the sub-contractor go under before they can afford to finish the job. That’s why it’s so important to have a sub-contractor factoring company behind you ahead of time so that you can get backed up in the event of a financial emergency.

 

A lot of sub-contractors would just try to apply for a line of credit from a bank, or another financial institution, but that would not be the wisest move. They can get the best terms with sub-contractor invoice factoring. They can get a serious cash advance to help finance the ongoing costs of expanding and paying for their payroll and equipment costs, or whatever kind of related business expenses are related to that industry. A financial institution might require construction subcontractors present several years of financial statements, and if they get approved, it might take several weeks or months to get the money that’s necessary to build the business. No one should have to go through that in order to get the money they need to grow their business.

 

Invoice Factoring For Sub-Contractors Is A New Solution

 

Sub-contractors can make payroll and pay their suppliers without the need for a loan. An invoice factoring plan can be just the right solution for you or your newly budding small company. Sub-contractors should be able to get paid immediately for a job. Immediate payment has a lot of benefits like immediate cash flow, enhanced efficiency, and it enables you to expand your sub-contracting business very quickly.

 

Factoring Works Really Simply Too

 

All you need to do is create your invoices for your completed jobs. Then, you sell your invoices to a factoring company who will give you cash immediately for them. Note, you don’t have to have completed the job yet, but if you have the invoice, and you are committed to completing it, you can probably still get an advance from a factoring company. If you are up to the task of finishing a job, but you don’t have the resources or equipment, a factoring company might be able to help you with the money you need to get started. It can be that simple to get your feet off the ground if you are a newly starting company that just can’t meet its financial demands to get started quickly.