Construction Invoice Factoring

After a decade plus of strong growth in the residential and commercial property markets, it would be a mild understatement to say things have cooled off recently. To meet cash flow projections, construction invoice factoring should be a tool in your belt.

What is invoice factoring? It is simply the sale of an invoice you have issued to a client, but which has not been paid as of yet, to a lending institution known as a “factor”, but usually just referred to as a “factoring company.”

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In exchange for the sale of this invoice, you get a percentage of the total invoice paid to you now. The percentage is often in the 70 to 80 percent range. When the invoice is paid by your client, you get the remaining value of the invoice minus any fee charged. The fee is determined by how long it takes the client to pay the invoice.

When should you use invoice factoring? Well, you can do it whenever you like. That being said, most construction businesses use it when they are facing a cash flow shortage. Let’s say you issue an invoice to a developer that has a payment of net 30, to wit, the developer has 30 days to pay it. How are you going to pay your laborers during that 30 day period? Hopefully, you have cash set aside. If you don’t, construction invoice factoring is a way of getting it to cover your bills.

Construction invoice factoring is a red hot field these days. With the field slowing down, more and more companies are facing cash flow issues. Apply with us today to find out how construction invoice factoring can solve your cash flow problems.