Invoice Factoring for Construction Companies

Construction contracts usually pay out by the milestone or at the end of the project. Unfortunately, this means contractors and subcontractors often pour their own cash into a project, or the project is delayed waiting for disbursement.

With invoice factoring, your construction company receives upfront cash that you can put toward anything you need, so projects run smoother. Some invoice factoring companies will even make it easy to advance payment to subcontractors of your choosing too. That way, you stay in control of your project, and your most trusted subcontractors can purchase supplies as needed. Plus, you’ll build stronger relationships with your most trusted subcontractors in the process.

Invoice factoring is not just another funding solution. Working with a factoring company can help strengthen your business from the inside out. A few benefits of invoice factoring for construction companies include:

You’re in control of how you spend your cash. A few ways businesses like yours apply their accelerated cash flow include:

Invoice factoring companies can help you pay most subcontractors, including:

Subcontractors attempting to secure their own funding can halt a project. It’s up to the general contractor to keep things moving forward. While you may be able to qualify for a traditional loan, line of credit, equipment financing, or SBA loan, these options are typically reserved for well-established businesses with top-tier credit. Plus, you may have to use your personal assets as collateral.

In the construction business, financial fluidity is important for timely project completion and to undertake larger jobs. Among the myriad of funding options, construction factoring emerges as a beacon of hope for many general contractors and small contracting firms. Unlike a traditional bank loan, factoring construction invoices simplifies the process of acquiring needed funds, making it an easy way to get the funding you need. Best construction factoring companies offer a straightforward factoring program, where construction receivables are sold to a third-party company, transforming outstanding invoices into immediate cash, usually within 24 hours.

Construction factoring companies assess the credit check of the clients, not the construction firm, a relief for business owners whose construction companies face credit challenges. This method of factoring may come with a factoring fee, but the advance rate provided often outweighs the cost, especially when funding is essential to start a new project or pay construction subcontractors. The factoring construction mechanism is simple: apply for construction factoring, choose which invoices to factor, get a cash advance minus a small fee, and allow the factoring companies to find the best resolution for getting customers to pay their invoices.

The versatility of construction factoring extends beyond mere funding. It’s a pathway to business growth and maintaining a positive business cash flow, especially when engaging in commercial construction. Factoring allows for an influx of cash without waiting for customers to pay, and the factoring solutions provided are tailored to meet the business needs of the modern construction site. Whether it’s resource factoring or single invoice factoring, the ultimate goal remains the same: to provide construction firms the financial backing to take on new jobs, build robust construction project portfolios, and grow their business. Through factoring, many construction companies have found that factoring is a great way to maintain operations, pay construction subcontractors, and get paid faster for completed work, ensuring business development continues unhindered.

Invoice factoring works differently than other funding solutions like bank loans and lines of credit. A few things that make it distinct include:

Each factoring company offers a unique set of value-added services. Depending on the one you choose, you may be able to receive:

Invoice factoring is ideal in many situations, but as your business grows and needs change, other types of funding may suit your needs better. Many construction factoring companies offer additional funding solutions to meet your changing needs, such as:

If you think invoice factoring may be the ideal funding solution for your construction company, learn more or get started by requesting a complimentary rate quote.