Construction Factoring - Financing For SubContractors

One of the biggest challenges for construction subcontractors is meeting payroll. Paying employees and suppliers is often hard because get paid 30 to 60 days after they submit their invoices.

Whether we like it or not, this is the way things are done in the construction industry. And, unless the subcontractor has a large cash reserve, waiting 60 days can be close to impossible. Especially with the never ending payroll responsibilities.

Going to the bank to get a business loan or line of credit won't help much. Banks are notorious for not lending money to subcontractors. Furthermore, banks usually require at least 2 years worth of audited financial statements showing a profit, and their loans can take weeks or months to get setup.

There is an alternative. This alternative can eliminate the payment wait and get invoices paid in a little as 2 days. Getting paid quickly allows subcontractors to easily pay employees and suppliers on time, enabling them to grow their businesses. The name of this financing tool is construction factoring, a special type of invoice factoring. Factoring receivables is an easy way to finance and grow your construction business.

Construction factoring works as follows:

1. You send a bill to the GC or client for a progress segment or completed job.

2. The factoring company advances you up to 75% of the submitted invoice. You get immediate use of the money. The remaining 25% is kept as a reserve.

3. Once your client pays the invoice, the 25% reserve is rebated to you, less a small fee .

The biggest requirement to qualify for construction factoring financing is to do business with reputable GC's or commercial clients and to have a well-run business. Generally, a factoring financing line can be set up in as little as 5 days.

As you can see, accounts receivable factoring provides you with a great tool to finance your growing construction business.