When we meet with referral partners, they are sometimes surprised to hear we also fund construction subcontractors. When it comes down to it, construction factoring solves an obstacle (check out our blog) – cash flow. The only difference is that the client’s situation can be a little riskier than other financing deals.
When construction subcontractors sign a contract with their client, they have accounts receivables due to the suppliers of the materials and their employees. Their cash flow challenges can occur during various stages of the project. The company may need the working capital to buy the equipment and supplies to start the project or during the project as more supplies are needed. They may also need working capital to pay employees.
The risk banks and some factoring companies find with construction subcontractors are many times out of the construction company’s hands. Weather, delays in project completion for any reason, and the varying sizes of projects can leave a construction subcontractor’s exact completion date up in the air. Going further, changes in the funding of a project or immediate changes to project permissions, such as government-led construction projects, also make it difficult for construction companies.
Banks may stay away from construction loans, but factoring companies, especially ones that are familiar with construction factoring, can be the answer to being able to complete construction projects on time, and ultimately grow your construction company.
Have questions about how factoring can help your company? Let’s talk!