Factoring and the Unwell Construction Industry
The tightening of the credit market has been difficult on several businesses, especially the construction industry which is responsible for building our nation’s houses, corporate offices, factories, apartments, offices, schools, roads as well as bridges. Thus, the general contractors and sub-contractors still may be experiencing cash flow problems – meeting payroll or buying supplies -long into the New Year.
Divided into 3 basic areas, construction includes: 1) Building, including general contractors who build residential, industrial, commercial, and other buildings. 2) Civil engineering construction where contractors build roads, bridges, highways, and tunnels, and 3) Specialty trade contractors, who work on projects like carpentry, painting, electrical or plumbing.
These jobs aren’t just about new structures, but often need site preparation, repairs, maintenance, or improvements on old projects.
In addition, this industry takes care of the income and the lives of architects, engineers, inspectors, appraisers, carpenters, brick masons, electrical and drywall contractors, flooring and tile contractors as well as those who are working on asphalt companies. As such, these people could very much benefit from invoice factoring to help them get by during these challenging economic times.
it’s the general contractors – normally specializing in either residential or commercial building – who take care of the majority of the construction jobs. General contractors are responsible for the whole job – but some of these functions are sub-contracted to specialty trade contractors.
Normally, specialty trade contractors obtain work orders from general contractors, property owners as well as architects. Repair work is almost always done on direct order from owners, occupants, architects, or rental agents.
Since the construction industry is very much dependent on economic business cycles, it’s easily affected by changes in interest rates and tax laws. For example, a small change in state or local regulations could lead to a cancellation of a job or a construction of a new project.
There has been an increase in factoring among contractors during the previous year, and it’s helping to provide the cash flow needed to pay suppliers, meet payroll and pay for insurance, even workman’s compensation. Factoring allows companies to go ahead with the project – rather than wait to be paid – since funds given to them are acquired from their current accounts receivables.
Truly, invoice factoring is very useful to the construction industry. Why? Because when factoring is used, the sub-contractor, or construction company, does not have to wait for payment before starting on the next phase of a project, or begin construction on a new project. Indeed, construction companies are provided with a quick turnaround – usually 24 to 48 hours – on their accounts receivables. More importantly, with construction invoice factoring, the company only has to wait awhile before it can gain access to cash, thus improving its ability to get the project done.
