Construction Business Factoring: Rescuing Contractors in this Challenging Economic Condition

Construction business factoring has been used in the construction industry for years and trends have shown that the usage of such a financial option is on the rise. The recent economic depression and tightening of the credit markets has been particularly hard on the construction industry. 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's hard enough to obtain commercial financing because of the current economic state, it's a good thing that contractors have other alternatives 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 acquire funds based on their current accounts receivables. Normaly, construction subcontractors have to wait as long as thirty to sixty days to get cash from their invoices. Construction factoring advances funds against invoices and provides enough money to pay the bills when things are not that easy.

The approval of commercial loans has become considerably stricter. This has a large effect on the availability of business financing for construction industries. And even before commercial finance options have gotten into this restrictive phase, construction business factoring is typically viewed as a risky move. The most salient risk factors for commercial construction finance normally include the following: Potential contractor liens are an added risk not present in commercial financing for existing commercial properties. Many construction projects exceed initial cost estimates and/or take more time to accomplish than originally anticipated.

Of the two facts noted above, the risk of potential contractor liens is a special lending concern in the current funding climate for commercial lenders because of the deteriorated state of the construction industry. However, the current difficulties observed in residential construction are frequently indirectly impacting the availability of construction funding for commercial properties because of the potential for contractor liens incurred during residential projects impacting the financial stability of contractors involved in both kinds of construction activity.

The real estate mantra in this case is quite fitting: "Location, Location, Location." The main point in emphasizing location is to illustrate that the use of non-local funding sources can be a practical solution to consider for commercial financing involving both existing properties and new construction. Local commercial lenders, in a few areas of the country, have stopped giving out new business financing and construction financing.

In the not-so-good business borrowing climate that we're seeing today, it's essential 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 information about business factoring, call The Interface Financial Group (IFG) at 877.210.9748.

Economic Recuperation Aids Small Business Factoring Companies

To outlast the ongoing economy, both big business organisations as well as small business have been struggling to survive. Nevertheless, the resources of larger businesses are not well available to small business owners. This is wherefore so numerous small businesses have folded during 2009. But the great news is that the current economic recuperation these days will really aid many small businesses, including small business factoring.

While many small businesses have either changed their model, introduced new wares or services, or have added products, others have been forced to close. Typically during a economic crisis it is the marginal businesses that do not endure, and this is true for all industries. It is this kind of "economic clean-up" that closes some doors, but opens up doors for other new businesses that start up after economic recuperation.

Thus, development that creates an opportunity for many small enterprises because as the enduring businesses rise, they will need more funding that can not be acquired through conventional funding such as banks, lending corporations or another asset based lenders. Likewise, getting limited assets, the starting new commercial enterprises also require small business factoring services.

How are these small business enterprises aided by small business factoring? As follows, perhaps indeed you require to know some new terms:

The ability of a commercial enterprise to convert assets into cash is called asset liquidity. Working capital is really important in entrepreneurial processes as it is an critical part of some small businesses.

Permitting entrepreneurs to meet their responsibilities and to remain in business is called working capital and liquidity. For any small commercial enterprise to survive, good cash flow is important.

No matter what way you look at it or what you call it, assets bring rate to your company, in the kind of cash. However, your stock, tools, supplies, machines, even your edifice, they're all assets. The contrary of an asset is a liability, an responsibility or outflow of money. A liability could be a loan that you are affecting payments on or some other obligation that costs money. You will most likely need to turn assets into cash in order to cover the cost of the indebtedness.

When you turn an asset into cash that is called liquidity. It also shows the degree that an asset can be exchanged in a business transaction without losing value.

Cash is the most liquid asset. Your inventory is different asset that can be turned into cash. Assets, that are not as liquid though, are invoices.

Via small business factoring, turning invoices into cash can be done while waiting for the requital. Seeing at your customers' credit (not yours) and paying you the majority of what's owed to you within as little as 24 to 48 hours is done by a factoring company. A new business strategy for profitability is by giving a small business factoring party an opportunity.

Factoring

Joe here of Interface Financial Group - and I'd like to talk to you about 5 reasons as to why you would want to factor with us. The very primary reason why we're the best option for factoring is speed. You don't have to wait for weeks as we can give you your needed money in as fast as 2-3 days. Need cash yesterday? We can even take care of that!

Second, Interface Financial Group is extremely flexible. There are no requisites for you to sell your invoices to us at a 90% advance rate or an 80% advance rate. Actually, we can get you 20-30% of that invoice in funds if that is what you only need now. On another note, if you need 30% of that invoice today, and another 30% the next week, that is not a problem. This shows the fact that in this industry, the flexibility of Interface Financial Group's spot factoring product is still unmatched.

The third reason, freezing the Interface Financial Group is that we don't let you sign any long term contracts. Several firms make you do this - and this requirement never fails to surprise me. Are they scared you're going somewhere? Well, let me say that Interface Financial Group isn't scared. We say we are and you use us when you need to and you do not have to use us when you do not need us and if you need to get out of our agreement, it'll cost you nothing.

The 4th reason is the absence of hidden fees. No fine print. We charge only one rate - and this includes everything. No application, termination, as well as wiring fees. Yes, you've heard that correctly. It's only when our clients are actually using our money shall we charge them.

Lastly, we are proud to inform you that we here at Interface Financial Group do not have a sales team. Therefore, you are dealing with the partners in the business. You're directed to the owners of the company. No loan committees to get through. No board of advisors to forward your request to and to get approval from. Indeed, these are the five reasons why you should avail of our services. Once again, Joe here from Austin, Texas - and I really do wish to be doing business with you soon.

How Factoring is Different from Business Loans

Hi, I'm Phyllis Rector from the Interface Financial Group. I hope you enjoyed the story in my last video to tell you a bit about how we help business owners. This time, this piece is about the question-and-answer segment that my friend Wynn and I did - so we can further shed light on a few inquiries that you might have about our services.

Tell us how quickly would I receive funding?

Well, actually at the Interface Financial Group, we pride ourselves on how quickly we can fund business.We at Interface Financial Group pride on how quickly we are able to fund people and businesses.} Our website even mentions funding in 24 hours. But realistically, this is not true: you have to send your financials, then we need to dig a little bit deeper regarding your financial capacity. So, typically, I have to have to say that funding possibly is going to take 48 hours. Sometimes, the hang up because you know the authorized person to sign the notification of sale is not there. So, that takes some time. And in construction, I have to be honest, it's going to take a little bit longer because the procedure is more complex.

Is it fine to sell just one invoice?

This is allowable -you can sell only one invoice. Our organization requires no minimums, maximums, and even time commitments. Even if we obviously want you to sell more, you can always choose to sell just one invoice.

Can I choose the invoice that I want to sell?

Yes, you may choose the invoice you want to sell and actually we advise that you to sell the invoices that are going to pay more promptly so that you can minimize what it is going to cost. But, you can choose whatever invoices that you want to sell, the ones your cash flow needs most.

How much is the amount that you'll advance?

Well, how much we will advance on any one invoice is dependent on the industry that you are in. Normally, we advance 90% on any one invoice in all industries, with the exemption of construction. We only advance 80% on invoices for construction because we know that in this field, payment takes longer. But, you do not have to take a full 90% or 80% advance all at once.Bear in mind, however, that you do not have to take the full 80 or 90% advance all at once. We can fund you partially - for instance 20% this week, 50% the next week and so one. We are flexible enough to address your every cash flow need.

How much money can I get out of my receivables?

So, let us take the case of a 90% advance. At 90% advance on any one invoice and we buy up to 60% of your current outstanding invoices. This means that your invoices will be under a 30-to-45-day term and with this, you could get approximately 55%. In construction, 80% advance on any one invoice and again, we would buy up to 60% of your current outstanding invoices, current in construction means 60 days because we understand the construction contractors take longer to pay, that's just the nature of the business. Now there's an exception to this. If you have 90% of your business with one customer, we cannot purchase 60 % of those invoices because there wouldn't be any recourse. Okay.

What is "recourse?"

So, recourse. We are buying these invoices with recourse back to your organization and we're going to require a personal guarantee just like the banks. So, if your customer does not pay and this could be because a dispute arose on work that you've done you know after he signed on a notification of sale or you know heaven forbid, that it could be that he gets bankrupt, we need you to either pay off that invoice or substitute the invoice from a different customer. So, if 90% is with one customer, there's nothing to substitute.

Phyllis, how much will it cost?

That is a very good inquiry - I remember you actually chuckling on the phone when I mentioned it is costly.} It is expensive and I did quote you a specific fee schemefor your specific situation. Perhaps the more essential thing here is the fact that our service is so flexible - and you could always not take the advance in full if it is very heavy for you. You forward to us invoices that your cash flow needs. This way, you control the costs related to factoring - of course, there is no price for the peace of mind brought about by knowing that you can make payroll. What's the price of being able to have new work and grow out of this recession? And what's the price of being able to perform on a contract when you have taken it on?

Hopefully, we have answered many of your questions. If you have more, please give me a call or send me an email and I'll get back to you.

Legislation Versus Small Businesses, Factoring is a More Feasible Choice

It seems that legislation that was intended to help small businesses punish late payers is instead being used against them by large corporations looking for a reward for settling bills fast, announces one academic study by the Federation of Small Businesses in England.

1 in three of the 4,000 business failures caused by delinquent payments last year have been waiting for payment since the credit crisis started and have been waiting for as long as 4 months, according to investigatations.

Factoring is a little known means for small B2B businesses to improve cash flow and increase working capital. The application process is quick and primarily relies on the credit rating of the B2B customers.

However the state's smallest firms, hit hard by the credit crisis and the recession, are experiencing a tentative recovery. A survey of 4,400 FSB members performed at the end of May 2009 revealed that 57 per cent were "quite confident" about the future prospects of their business, while 68 percent said that they intended to grow in the next six months.

One expansion methodology that small businesses all over the world can use to grow is accounts receivable factoring.

Rather than experiencing late penalties some enterprises have discovered that factoring helps keep them current with bills, payroll and supplies, letting them stay in business, produce and get more business.

SBA Loans versus Factoring for Small Businesses

To help small businesses owners know how they can compete for the impulse greenbacks offered by the govt, centered communities across the nation are playing host to "Stimulus Presents Opportunities For Small Business" workshops. For small businessmen particularly, it is very challenging to figure out the simple way to exploit the chances provided by the governing body, and this is the rationale behind these workshops.

Thanks to the recession, plenty of the small businesses in the country (those with only one hundred staff) are in crisis. The central government has made it easier for small businesses to get loans now that there are guarantees for loans at ninety % so lenders only have a 10 percent risk. Overall, it's a difficult process, though.

Figuring out the easy way to take advantage of the opportunities presented the stimulus package licensed by Congress for the non-public and public sectors can be troublesome.

It's critical for the US growing businesses Administration to encourage small businesses to take part in the impulse programs because it thinks small businesses are the backbone of the economy.

This is the reason accounts receivable factoring and other such successful techniques are being used by many small businesses to help them stay afloat. The business owners will likely have their money from a factoring company long before a small businesses looks can get a Small Business Association (SBA) loan. A difference is that there are no charges with an SBA loan.

The federal regime will be funding projects without delay and there will also be in an increase in federal funding "to state legislature programs that already exist." This state funding has already been earmarked and totals $24 bn. of the $55 bln allocated for programs and projects in California.

Business owners who want to bid on impulse projects can learn about them at Governor's California Recovery Task Force web site, at www.recovery.ca.gov or at the Department of General Services eProcurement website, www.eprocure.dgs.ca.gov/default.htm.

The duration for the SBA funding will change depending on the program but it will end at the end of 2010 or the beginning of 2011. But for factoring, an entrepreneur can call the Interface Financial Group any time to start the process.