Factoring and the Ailing Construction Industry

The construction industry has been largely affected by the tightening of the credit market – this is strange considering the fact that it is the industry responsible for building the nation’s homes, factories, corporate offices, schools, roads and bridges. Therefore, the general contractors and sub-contractors still may be having cash flow problems – meeting payroll or buying supplies -long into the New Year.

The industry is categorized into 3 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.)

These responsibilities are not just about new structures, but often need site preparation, repairs, maintenance, or 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 challenging economic times.

it’s the general contractors – normally specializing in either residential or commercial building – who take care of the majority of the construction jobs. They are in charge of the entire job, and although general contractors may do a portion of the work with their own crews, they usually give out work to specialty trade contractors who typically do the work of only one.

Usually, specialty trade contractors obtain work orders from general contractors, property owners as well as architects. Owners, occupants, architects and rental agents, however, directly order repair work from these contractors.

Since the construction industry is very much reliant on economic business cycles, it is easily affected by changes in interest rates and tax laws. For example, a small modification in state or local regulations could lead to a cancellation of a job or a construction of a new site.

There’s been an increase in factoring among contractors during the previous year, and it is helping to provide the cash flow needed to pay suppliers, meet payroll and pay for insurance, as well as workman’s compensation. Factoring allows companies to go ahead with the project – instead of waiting to be paid – because funds given to them are obtained from their current accounts receivables.

Construction is one of several industry sectors that can benefit from invoice factoring. With factoring, the need to wait for payment before the construction company begins the next stage or the next project is eliminated. With invoice factoring, the sub-contractor or construction company can realize quick turnaround, from 24 to 48 hours, on accounts receivable due for completed stages of a construction project. With construction invoice factoring, the construction company, or the sub-contractor, can be paid immediately for accounts receivable invoices, which enriches cash flow and improves the company’s ability to start immediately on the next stage of construction for each project.