Construction Factoring Allows Contractors to Compete


Freight Bill Factoring

Before construction factoring, subcontractors and smaller construction companies often faced a difficult dilemma when bidding for potential jobs. They may have wanted a particular job and knew they could complete it flawlessly, but they lacked the necessary money needed to do it as they envisioned.

Why did the construction companies lack the money? The construction business works likes this: When the government or some other party needs a construction project completed, various construction companies put bids on the project. The company with the winning bid will then often subcontract out certain portions of the project to smaller subcontractors.

Although larger projects typically have periodic payments built into the contracts, construction contractors still require large sums of money at the initial stages of projects in order to complete them. Construction workers have to be paid, raw materials purchased and equipment maintained. If outstanding invoices from previous construction jobs haven’t been paid, the contractor is left unable to compete for any new bids.

Unable to compete, that is, until construction factoring came along. With construction factoring, construction companies can now rest assured that they will have the money from previous jobs to invest in new bids if necessary. Construction factoring provides for labor and other costs to be met regardless of whether previous clients pay on time.

The benefits of construction contract factoring are many. Having to pass on possible new jobs as the subcontractor or contractor waits for their accounts receivables to come in becomes a thing of the past. The Construction Financial Management Association stated that on average, 66 days go by before subcontractors are paid for their services. With construction factoring, they usually receive payment from the factoring company within the week, often within a couple days. That large job that seemed impossible to bid on suddenly becomes within reach with factoring.

Construction Factoring also eliminates the contractor from having to take out a loan to cover costs, provided they even qualify for a loan. Getting a construction loans from a bank can be a difficult and time-consuming process. Construction Factoring offers construction companies the funds they need when they need them.

When choosing the right construction factoring company to work with, contractors may want to look at those that specialize in construction factoring. Companies that offer a variety of financial services to businesses may not know the fastest way to get paid from general contractors or that one specific tip that speeds up the process with the government. A specialized construction factoring company will.