Factoring and the Unwell Construction Industry

The construction industry has been largely affected by the tightening of the credit market - this is funny considering the fact that it is the industry responsible for building the nation's houses, factories, corporate offices, colleges and universities, roads and bridges. Thus, the general contractors and sub-contractors still may be having cash flow issues - meeting payroll or buying supplies -long into the New Year.

The field of construction is categorized into three 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 as well as improvements on old projects.

Also, 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 and even those who are working on asphalt firms. As such, they could very much take advantage of invoice factoring to help them get by during these difficult economic times.

It's the general contractors - normally specializing in either residential or commercial building - who take care of the large chunk 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 receive work orders from general contractors, property owners and even architects. Owners, occupants, architects and rental agents, on the other hand, directly order repair work from these contractors.

Since the construction industry is very much reliant on economic business cycles, it's easily affected by changes in interest rates as well tax laws. For instance, a small change in state or local regulations could result to a cancellation of a job or a construction of a new site.

There has been an increase in factoring among contractors during the previous year, and it is helping to provide the cash flow required to pay suppliers, meet payroll and pay for insurance, even workman's compensation. Factoring enables companies to go ahead with the project - rather than wait to be paid - because funds given to them are obtained from their current accounts receivables.

Indeed, invoice factoring is very helpful to the construction industry. With factoring, the need to wait for payment before the construction company starts the next phase or the next project is eliminated. Indeed, construction companies are provided with a quick turnaround - normally 24 to 48 hours - on their accounts receivables. With construction invoice factoring, the construction company, or the sub-contractor, can be paid overnight for accounts receivable invoices, which speeds up cash flow and improves the ability of the company to start immediately on the next phase of construction for each project.