Construction Factoring to help Sub-contractors Finance Growth Ahead
The 2010 Global Construction Survey released by accounting firm KPMG emphasized on the fact that the sector on Australian construction was executing well in the midst of the global financial crisis because of the stimulus package supplied by the Australian Government. Moreover, this sector is searching forward for new projects to come pouring and an increased backlog for the new two to four years.
The good news for the construction sector overall is really a mixed blessing for sub-contractor businesses in Australia as recent data from credit reporting firm Dun & Bradstreet demonstrated that trade payment terms increased year-on-year. This data exhibits that firms have to wait for an average of 53 days in order to have their invoices or progress claims to be paid.
Therefore, it is not unexpected that construction factoring – which has been used in the construction industry for years – is on the rise. Also with the current developments for property managers to focus on the new sustainable building and changes in building code standards, contractors are experiencing cash flow problems. Commercial financing has been in chaos for the past year, looking for construction funding for commercial property makes this situation rather evident.
Construction factoring can provide the much needed cash flow to pay providers and meet payroll. Why? Because factoring enables businesses to obtain funds based on their current accounts receivables. Typically construction subcontractors have to wait around as long as thirty to sixty days to get paid for their invoices. Construction factoring advances funds against invoices and offers enough money to pay the bills when things are tight.
Recent availability of commercial loans has stiffened significantly. For several reasons, this has lead in even more of an apparent shortage of business financing for construction of new commercial property. Even before commercial finance choices became more restrictive during the past few years, construction financing was generally viewed as more “risky” by most lenders.
Looking at alternative suppliers of finance is essential in the current environment because as commercial lending is now dominated by the Major Australian Banks, there may be a larger risk that they have over-concentrated in particular local regions in relation to their lending exposure. Smaller alternative providers do not usually deal with the same issues and have the capacity to commercially finance both current properties and new building projects. In some areas of Australia, the major banks have halted virtually all new business financing as well as construction financing.
In the negative business borrowing environment that we are seeing today, it is more important than ever for small business owners to seek out an invoice factoring company which can discuss the feasibility of obtaining funding assist from an alternative finance provider. Single invoice or spot factoring may be beneficial to contractors and related small companies in order to help them stay in business and possibly grow while utilizing these smart financing choices.
Call The Interface Financial Group (IFG) at 1.300 957 900 for more particulars on construction factoring.
