You may find yourself in a situation where you have money but not in cash. It could be your client who owes you, but they have yet to credit your account. You can go to any factor, issue your invoices, and get financed. You enjoy several advantages, but before we dive into that, let’s define factoring.

What Is Factoring

This is the process where you can get financing using your pending invoices by presenting them to a financial institution known as a factor. You get 80% of your invoices by selling, and the factor retains the 20% in reserve. You will not receive the 20% until your account receives money when the factors pay you the 20% deducted charges involved in the process.

Advantages of Construction Factoring

Quickest Financial Approval

Unlike other financial institutions, a factor can approve your application in days. Even if you have a bad credit score, a factor can approve your application, provided whoever owes has a good credit score and good payment records.

Fewer Limitations

When seeking money from a bank, you will get money based on your credit score records, the profit your business makes, and other information.  You only need to submit invoices worth the amount you want, and you are ready to go.

Less Costs

With a factor, the only costs incurred are the discounted rate and other charges involved in the process. These charges, most of the time, are way less than the cost charged by banks.

Freedom of Expenditure

A factor doesn’t dictate to you how to use your money. You can use the money to do anything, including paying employees for cash flow, buying inventory, among other things.

Consideration for Construction Factoring

Even though you have all the advantages to enjoy, it is good to understand how construction factoring can be a unique proposition for construction companies. For example, with the complexity of the industry, it would be ideal to look for an experience factor and acknowledge the situations that can affect how clients pay their invoices.

A qualified factor will understand that variables, like “paid if paid” and “paid when paid,” can result in disputes and other circumstances that would delay payment of the money into the account.

There is always a way out in any situation. Even if you have your client delaying payment and you have the invoices, you can approach any of the factors you know for financing. It relieves as you wait for your account to be credited.