Construction FactoringThe construction industry is one of several sectors that can benefit greatly from construction factoring. A construction company is no longer required to wait for payment before starting on the next phase of a project, or begin construction on a new project.
With invoice factoring, the sub-contractor or construction firm can receive immediate access to cash due for completed stages of a construction project.
Construction factoring is an innovative finance option and a great alternative to overdrafts and loans. You receive up to 90% of the value of your invoices paid within just 24 hours – and you won’t have to worry about chasing your clients for payment.
With construction invoice factoring, the construction company, or sub-contractor, can be paid virtually overnight for these invoices (accounts receivable) thus speeding up cash flow and improving the company’s ability to start immediately on the next phase of construction.
Factoring is very straight forward. You deliver goods or services to your client and notify the factoring company of the work performed and your invoice is raised. The factoring company advances you the pre-agreed percentage value (typically 70-90%) of the invoice the next day and collects the debt from your customer. Once the invoice is paid by the customer, charges are deducted and the factoring company pays you the balance of the invoice value.
There are also different options to consider when choosing the right factoring facility for you; Confidential factoring is a flexible funding solution for businesses which offers the cash advance and credit control aspects of a factoring facility combined with the confidentiality of invoice discounting so the factoring company approaches your customer using your company name.
Non-recourse factoring is where the factor takes on the bad debt risk. It accepts specified risks around the debtor’s failure to pay and because of this, non-recourse factoring will be more expensive than recourse factoring.
Any business providing goods or services to other businesses on credit may be eligible to apply for a factoring facility.
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