How Factoring Differs From Business Loans
The construction industry has been largely affected by the tightening of the credit
market - this is funny considering the fact that it's the industry responsible for building the nation's homes, factories, corporate offices, colleges and universities, roads and bridges. It is expected then that long into the New Year, contractors will still experience a few cash flow problems associated with meeting payroll and purchasing supplies, for example.The field of construction is categorized into 3 basic areas: building (to take care of residential, industrial, and commercial buildings); civil engineering construction (to take care of roads, bridges, highways and tunnels); specialty trade contractors (to work on special projects such as carpentry, painting, plumbing and electrical works.)
But there is more to construction than just new buildings - this industry also takes care of site preparation, repairs, maintenance and improvements on old projects.
The construction industry supports architects, engineers, inspectors, appraisers, brick masons, carpenters, electrical and drywall contractors, flooring and tile contractors, and even asphalt companies, all of which could take advantage of invoice factoring to help them get through these challenging economic times.
Construction jobs are normally done by general contractors, who specialize in one type of construction such as either residential or commercial building. General contractors are responsible for the entire job - but some of these functions are delegated to specialty trade contractors.
Usually, specialty trade contractors receive work orders from general contractors, property owners and even architects. Owners, occupants, architects and rental agents, however, directly order repair work from these contractors.
Because the industry is very much reliant on economic business cycles, it is easily affected by changes in interest rates as well tax laws. Changes in state or local regulations or budgets can lead to new construction or a cancelled job.
Last year, the factoring industry saw a remarkable increase in the availment of their services by some contractors - immediate cash was then utilized to help businesses pay suppliers, meet payroll, pay for insurance and workman's compensation. Factoring enables businesses to go ahead with the project - instead of waiting to be paid - since funds given to them are obtained from their current accounts receivables.
Construction is among the many industry sectors that can benefit from invoice factoring. Why? Because when factoring is utilized, the sub-contractor, or construction company, does not have to wait for payment before starting on the next stage of a project, or begin construction on a new project. With invoice factoring, the sub-contractor or construction company can realize quick turnaround, from 24 to 48 hours, on accounts receivable due for completed stages of a construction project. With construction invoice factoring, the construction company, or the sub-contractor, can be paid overnight for accounts receivable invoices, which enriches cash flow and improves the ability of the company to start immediately on the next stage of construction for each project.
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