Countless financial challenges often happen in the construction industry and can threaten the stability of the business. Unpaid invoices, costly materials, underestimated projects, and other issues can affect a company’s cash flow. When it gets here, most companies will not stay afloat for long without cash reserves. That is why most construction companies depend on construction invoice factoring to meet the cash demands of the business.
Defining Construction Invoice Factoring
Invoice factoring in construction allows a subcontractor to borrow against their outstanding receivables. The construction company assigns its invoice to a factoring company in exchange for cash. The process typically takes a few business days. This allows the company to have the cash flow to continue with their projects or start new ones.
Once you decide that invoice factoring is for your company, ensure that you qualify for it as well. Generally, you should have outstanding invoices between 30 and 120 days old. You can then research the various factoring companies in your area and see which one suits your needs. Look at the rates charged, additional fees, and experience working with construction companies. This ensures you have chosen the right fit for your company.
Common Funding Challenges Facing Construction Companies
Several challenges face construction companies, leading to the need for construction invoice factoring. Here are some of them.
Lack of equipment, tools, and supplies to keep construction ongoing, enough cash to make payroll, and of office space, furniture, etc.
Marketing funds to advertise the business
Lack of cash for rent and basic utilities like electricity and water
Business insurance to protect business
Purchasing new equipment
Hiring new employees
Expensing business operations
Who Needs Construction Invoice Factoring
Whether you are an independent contractor or you own a construction company, you can benefit from invoice factoring. This type of financing is also ideal for any construction company that needs funding fast or may not qualify for other types of loans.
If you feel that construction invoice factoring is for you, reach out to Aspen Capital Solutions. We understand that businesses face cash shortages from time to time. We can therefore help you get the cash you need to meet the needs of the company.