What is Construction Factoring?
Construction factoring is a financial solution designed specifically for the construction industry. It allows construction companies to sell their outstanding invoices to a factoring company in exchange for a cash advance. This provides immediate access to working capital, eliminating the need to wait for customers to pay their invoices. Construction factoring is a popular choice among construction businesses, including contractors, subcontractors, and suppliers, as it helps to improve cash flow, reduce financial stress, and increase business growth.
How Construction Factoring Works
The construction factoring process is straightforward. A construction company sells its outstanding invoices to a factoring company, which then provides a cash advance of up to 90% of the invoice value. The factoring company takes responsibility for collecting payment from the customer, and once the payment is received, the factoring company deducts its fee and returns the remaining balance to the construction company. This process is typically completed within 24-48 hours, providing construction companies with quick access to the funds they need to operate their business.
Construction Factoring Costs and Fees
The cost of construction factoring varies depending on the factoring company and the specific services provided. Typically, factoring companies charge a fee ranging from 1-5% of the invoice value, depending on the creditworthiness of the customer and the length of time it takes to collect payment. Some factoring companies may also charge additional fees, such as setup fees or monthly maintenance fees. However, these fees are often minimal and can be offset by the benefits of improved cash flow and reduced financial stress.
Uses For Your Factoring Cash Advance
The cash advance provided by a factoring company can be used for a variety of purposes, including:
- Paying employees and subcontractors
- Purchasing materials and equipment
- Meeting payroll and tax obligations
- Taking on new projects and expanding business operations
- Investing in new technology and equipment
- Improving cash flow and reducing financial stress
By providing immediate access to working capital, construction factoring can help construction businesses overcome cash flow challenges and achieve their goals.
So what is the best option for generating cash flow: Construction Factoring vs Loans?
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Construction Invoice Factoring Better than a Loan
Instead of going through the hassle of trying to qualify for a loan, construction factoring is an easy financing alternative. Acquiring a bank loan is difficult even in a good economy, because a company must be able to prove that they have the capital to pay it back.
Construction Invoice Factoring is Easy
EZ Invoice Factoring’s construction factoring can get your construction or subcontracting company fast cash for your invoices. Working with a construction factoring company provides quick and effective financing solutions for construction businesses. An adequate flow of cash allows you to pay expenses, take on new jobs, and most important, grow. With construction factoring, you are immediately funded for about 80 percent of the invoice. The remaining 20 percent is held in reserve until EZ Invoice Factoring is paid by the customer. Once the customer pays for the invoice, the remaining reserve is forwarded to you.
Years of Experience in the Construction Industry
EZ Invoice Factoring has years of experience in the construction factoring business. Construction factoring companies provide quick funding for invoices, often within 1 to 2 days, and determine factoring rates based on various factors such as business history and customer credit. Many factors don’t work with the construction industry. EZ Invoice Factoring is not like other factors, we are committed to providing funding for construction companies, and we provide top-not construction financial management services to all of our clients. Just like other industries, construction companies need good cash flow and EZ Invoice Factoring is the company that can provide it. Timely payments and effective cash flow management are crucial for the successful completion of construction projects.
