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Tips for Boosting Customer Relations Which Can Maximize the Benefits of Small Business Factoring

When you’re involved with small business factoring, your relationships with your customers invariably comes into play. When you factor receivables, you get an advance on the money owed to you by your customers. Your customers then pay your factor on the due date and then you get the rest of your money (minus the fee charged by the factor) when your customers pay in full.

The fee and the advance are all determined by the creditworthiness of your customers. You pay a fine when your customers pay late, and you have to pay back the advance when they don’t pay you back at all.

So it’s very important that you have a good working relationship with your customers. Here are some tips about customer relations so you can maximize the benefits you get from factoring.

When you have new customers, set credit limits for them. A new customer is usually an unknown entity, and so you have no idea of how (or if) they pay their bills. You need to set a credit limit, so you can monitor their payment habits without risking too much.

Your customer should know about the credit limit, and they should know what steps they need to take in order to get better credit terms. Perhaps when they’ve paid in full and on time for a given time period, you can increase their limit.

Always set clear conditions and terms in your contracts. You must have a proper written contract with your customers, whether they’re old or new. If you’ve been used to verbal agreements with your customers, that has to stop if you expect to factor receivables.

Everything should be specified, every word defined clearly, and every figure clarified. There should be nothing unclear about the contract, and nothing should be open to interpretation. That keeps the misunderstandings and confusion to a minimum. And if the terms and conditions change, a new contract must be drawn and signed by both parties.

The amount owed to you must be specified. And the due date must also be very clear as well.

Try to forge a secure personal relationship with your customers. Building a strong personal relationship with your customers doesn’t just get you more sales. It also ensures that the companies you sell to pay the amount they owe in the time specified in the contract.

A contract may not be enough to deter your customers from paying late. But if you have a personal connection with them, they may be less inclined to destroy or damage that trust.

Customer relationships are essential for your business. And it becomes even more important when you’re engaged in small business factoring. By having a strong relationship with your customers, you can also make sure that your relationship with your factor is smooth as well.

The Fastest Way to Get a Business Loan

When you’re a business owner, you will sometimes need to take out a business loan. However, getting a bank loan is not always the best option. This is especially true when you need cash to pay some overdue bills, buy new equipment, or invest in a profitable venture with a short window of opportunity.

Bank Loans Take Time

Traditionally, most businesses take out a loan from a bank. This can be an excruciatingly slow process, and it will take an eternity if you still want to compare loan rates from several banks. On occasion you may even go through this interminable process only to find out that the bank won’t grant you the loan.

For traditional bank loans, there are several things you can do to speed up the process and to increase your chances of getting approved. In general, you need to make sure you have a good credit rating and credit history. You also need to have verifiable income and profit, as well as enough assets to use as collateral. You must have all your documentation ready when you make your application. But even if you have complied with all the requirements, loan applications could take a week or more. Fortunately for you, there’s another way to secure a “loan.”

Factoring

Factoring, which is sometimes called accounts receivable financing, involves exchanging your accounts receivable for about 80% of its value. The remaining amount will then be held back until the full payment is collected. The factor handles all the transactions, credit assessments, and collections, and receives a fee for their services. The factor usually charges a certain percentage (2% to 3% is common) of the face value of the accounts receivable, with a tiny percentage penalty for late charges.

The two most notable advantages of factoring are that first, the application process is much faster compared to taking out a bank loan. It’s not unusual for the approval to be given within just a few days after all the requirements have been met. The other main advantage is that the payment for the loan depends on the flow of customers. During lean times when business is slow, the factor can also adjust your payment amount.

Quicker Alternatives

There are still even faster ways of getting a loan, although they come with rather serious drawbacks:

Using a credit card is a popular form of business financing, and if you already have a credit card then it could prove to be the fastest way to get a business loan. However, the interest rates can be truly high, and the penalties for late payments can have dire consequences on your finances.
Another relatively quick way to get a business loan is you use your friends and family as a source of financing. About $89 billion are borrowed from family and friends in the US alone every year. This may result in lower interest rates and more flexible payment terms, although most experts say that borrowing money from people you know can damage personal relationships.

It’s obvious that when comparing all possible ways of getting a loan quickly, factoring is the most viable alternative to get a business loan. It allows you to get the money you need quickly, and the interest rates and fees are more than reasonable.

Unsecured Loan for the Construction Industry

The construction industry rakes in billions of dollars year after year. Private construction projects gross 670,799 million while public construction projects total 272,340 million. For private construction, residential projects are just slightly higher than non-residential projects. These figures show that being in the construction industry means you will never run out of projects, because there will always be new infrastructure to build. However, it also means that it’s a highly competitive industry with many players. And when it comes to competition, it’s really all about who gets the contract and who has the biggest working capital to ensure timely completion of projects given to them.

The Problem Faced by Construction Companies

In the construction industry, it’s all about committing to delivery. A construction company won’t be able to commit delivery timelines to prospective customers if they don’t have confidence in their ability to deliver in the first place. The ability to deliver on projects is based on a lot of factors, and these include:

· Timelines: When bidding for a project, the client will be looking for certain timelines because they will always have project completion time in mind. For instance, if they need a building erected by a certain month, they will work with the contractor that can meet this deadline. Timelines therefore are very crucial.

· Capacity: Each construction project will be different in size, so this means it will have a different set of requirements in terms of capacity. A client will choose a contractor that can commit to the size of the project based on its current resources. According to the Bureau of Labor Statistics, the total construction industry in terms of number of people averages a total of around 5,941 in employment. And that’s just your people. This will be spread across various contractors and subcontractors, so capacity will really depend on how many people you have in your employ as well.

· Available working capital: Directly related to timelines and capacity is the available working capital of the construction firm. If you’re sitting on low a working capital, you can’t confidently make a pitch and get contracts left and right. This is why knowing where to get an unsecured loan for the construction industry is important. It helps you get the working capital you need to grow and get projects.

The beauty of unsecured loans

When you have access to an unsecured loan, this will be to your advantage because normally, applying for a loan is very tricky. Traditional financing institutions such as banks would have a long list of requirements and are quite stringent when it comes to approving loan applications. You’ll need to have a stellar credit history and track record, as well as a lot of other prerequisites. Collateral (in the form of equipment, real estate, and others) is also usually a requirement for such type of loans.

Many construction companies find these requirements quite difficult to meet. But the beauty of applying for an unsecured loan for the construction industry is that you don’t need any of these requirements. Instead, these lenders will look into the credibility and credit-worthiness of your client.