Large-scale construction projects, such as hotels, hospitals, and shopping centers, often require the coordination of subcontracting companies. These subcontractors work in stages, each completing their respective task. Payment for subcontractors, however, usually is not sent out until after the entire project is completed. This can cause a major strain on cash flow. To correct cash flow issues, and prevent them from occurring in the first place, many subcontracting companies are employing construction factoring services.
What Is Construction Factoring?
Construction factoring is a method of monetizing open customer invoices for immediate revenue. Instead of waiting until large scale projects are completed, or even the standard aging window on customer invoices, subcontractors can use construction factoring and sell their receivables for cash. Construction factoring services are easy to arrange, and the turnaround time on submitted receivables is 24 hours. This keeps a positive and steady cash flow, with no lags in payments, and allows subcontractors to meet their financial obligations without placing their finances or credit scores in jeopardy.
It's Not Just For Large Jobs
Subcontractors can use construction factoring services outside of large-scale projects as well. The purpose of factoring is to speed up the payment process, as well as clean up accounting by closing open customer accounts and getting revenue from one centralized and reliable source. Many subcontractors partner with factoring service providers to manage invoices as they are generated, rather than waiting months to see payment from customers.
Factoring allows subcontractors to accumulate capital quickly. This revenue can then be used to obtain better equipment, hire more workers, advertise more, and expand the business to reach a larger customer base. With revenue and invoiced being handled through construction factoring, subcontractors only have to worry about landing projects and completing jobs. Factoring simplifies the accounting side of any business. Additionally, factoring services do not compromise credit ratings or place any debt on the balance sheets.
Why Wait On Payments?
If you are still waiting on payments from previous contract work, or you are about to enter into a large-scale project, you should consider construction factoring. Call The Lavan Financial Group at 203-308-4547. Our team works with subcontractors across the country to provide factoring services and many other financing solutions to help them maintain a steady cash flow, and get the capital they need for every stage of their projects.