Construction Factoring

Get access to revolving funds when you need it most

Dane Panes

January 11, 2021

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Construction Industry

Construction Industry Overview

Construction is one of the leading industries in the United States and employs over 10 million people across the country. Between general contractors and sub-contractors there are thousands of specialty firms providing construction services for both commercial and residential projects. Construction companies rely on suppliers for materials and equipment and are frequently in need of labor to execute on new and existing projects. As the economy continues to demand more development it results in contractors needing to hire more people and purchase more materials. This also fuels the growth of material suppliers and manufacturing companies across the country.
Construction companies are frequently contracted through paid when paid contracts which often results in delayed or slow payments. General contractors are waiting on payment from their clients, first tier sub-contractors are waiting on payments from general contractors, and second tier subcontractors are waiting on payments from first tier subcontractors. This payment waterfall makes it difficult for contracts to float their construction jobs. Our construction factoring programs provide ongoing liquidity for contractors, top to bottom cash management, funds control, and risk mitigation solutions for the commercial construction industry as we offer contractor factoring and subcontractor factoring. Speak with an SMB specialist today to learn more about our contractor financing programs.

Construction Factoring

Construction companies are known to always be waiting on payments. Slow paying jobs result in a trickle-down effect which can adversely affect both general contractors and subcontractors. Even when customers pay on time it is usually close to 90 days of cash outlay before a first invoice is paid on a construction job. During this time period construction companies are responsible to pay for engineering, materials, labor, insurance, and other operating expenses. This is where construction factoring plays a beneficial role. It allows you to receive payments on invoices without having to wait the 30, 60, or 90 days.Construction factoring financing gives customers a chance to access a portion of their invoice values for a cost. Buying outstanding invoices for a discounted price and then taking over collections is what construction factoring companies do. In our factoring programs, we can help with mobilization funding, paying suppliers early and receiving discounts, and for payroll.

Construction Factoring for General Contractors

For larger and more established general contractors our program can be used as an alternative to bonding. This allows for general contractors to use the subs they choose, regardless of their ability to secure a bond and their credit worthiness. With our contractor factoring program vendors and suppliers are paid within 1-2 days of receiving an approved pay application. For small general contractors, our construction factoring financing assists in bidding for larger jobs, with working capital advances along the way. Similar to large general contractors, our program enables on time payments to subcontractors, suppliers, and vendors. Some of the services that are included in our program are the following.

  • Lien Waiver Collection
  • Insurance Premium Payments
  • Union Dues
  • Vendor, Supplier, and Subcontractor Payments
  • Payroll Funding
  • Monitoring Credit of Subcontractors

Construction Factoring for Subcontractors

Subcontractors are burdened with the need to take a multitude of risks on construction projects. Outside of having to perform on the contract, manage payroll and operational expenses, subcontractors also have to extend credit to general contractors. Subcontractors are typically the smaller companies on a job site and interestingly enough, they are responsible for the most financial risk. On average subcontractors have to wait 50+ days to receive payments on monthly progress bills. Our subcontractor factoring program reduces the exposure down to just one billing cycle, from the normal 2 to 3 billing cycles subcontractors normally wait. As a subcontractor, you can choose which projects, and which invoices you want to finance and once you use our subcontractor factoring program you can be funded in just 24 hours of invoicing. Factoring provides support for subcontractors to bid on new projects, take advantage of supplier and vendor discounts, and mitigate financial risk on projects.

Benefits of Construction Factoring

  • Payroll Funding
  • Working Capital for Operating Expenses
  • Credit Reference Letters
  • Mobilization Funding
  • Insurance Premium Payments
  • Payments of Union Dues
  • Supplier and Vendor Credit Lines
  • Lien Waiver Collection
  • Payment to Vendors, Supplier, and Subcontractors

Choosing the right Construction Factoring Company

It’s important to remember that money is a commodity, which means it’s widely available. While money is the end goal, your partner on a construction project is what’s most important. When speaking with construction factoring companies, it’s imperative to make sure you are speaking with their construction expert. Choose the company that knows the ins and outs of a construction project. Make sure you are working with an expert who understands progress billing, lien rights, and all aspects of construction. Speak with a construction factoring expert today!

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