Construction business factoring has been used in the construction industry for a long time now and trends have shown that the usage of such a financial option is on the rise. Particularly, this is partly because of the economic downturn and the tightening of the credit market. It is shown that changes in the building code standards as well as cash flow problems have been crippling small-time contractors. And because it is hard enough to seek commercial financing because of the current economic condition, it's a good thing that contractors have other options when it comes to construction funding.
Recently, there has been an increase in construction factoring among contractors, which provides the much needed cash flow to pay suppliers and make payroll. With factoring, businesses are able to obtain funds based on their current accounts receivables. The normal case is that subcontractors have to wait for 30 - 60 days before they will have available cash from their invoices. With construction factoring, on the other hand, they are provided with immediate funds which are very helpful in addressing their current financial needs.
Recent availability of commercial loans has tightened significantly. For many reasons, this has resulted in even more of an apparent shortage of business factoring for construction of new commercial property. Even before commercial finance alternatives became more restrictive during the past few months, construction business factoring was generally perceived as more "risky" by most lenders. Among its few disadvantages is that potential contractor liens are an added risk. Many construction projects go beyond initial cost estimates and/or take more time to complete than originally planned.
Because of the deteriorated health of the construction industry, the risk of potential contractor liens becomes a more serious concern. And due to the potential for contractor liens incurred in residential projects, the current difficulties in residential construction have indirectly affected the availability of commercial properties funding - it is thereby a vicious cycle.
In this type of business, truly it's about "location, location, location!" This is because non-local funding can be acquired to help in the construction of both existing and new properties. Local commercial lenders, in a few areas of the country, have ceased giving out new business financing and construction financing.
In the not-so-good business borrowing climate that we're experiencing at present, it's important more than ever for small business owners to seek out an invoice factoring company which can discuss the possibility of obtaining funding help outside of the local lending area. Contractors and small businesses can truly benefit from a single invoice factoring, or spot factoring, to keep themselves alive, and in some cases, grow their business.
For further details about business factoring, contact The Interface Financial Group (IFG) at 877.210.9748.
This article was added on Monday 30 November, 2009.
