Large corporations such as construction companies often face challenges when it comes to funding their projects. This is probably because they are never paid in full till the completion of their work. Therefore without an alternative source of finances, it becomes a little bit difficult for the project to move on smoothly. You might be thinking that construction companies can easily get funding from banks.
On the contrary, most banks shy away from lending large sums of cash to such companies not because they lack the funds, but they fear the risks posed by construction companies. As such, you will come across so many stalled projects. However, construction invoice factoring has greatly helped most companies to carry on with their projects without delaying.
One thing about most construction firms is that, they always have many receivables. This implies that they at least need to have some extra cash which will help them pay their workers, pay rent and several other daily expenses during construction.
Even if a company will manage to secure a loan from a bank, it won’t be for free because it will definitely attract interest depending on the amount borrowed. This will in turn negatively affect the company’s profits. However, construction invoice factoring companies only charge a small fee for invoice collection which means the construction company will not have to lose a lot of money as they would do by taking a loan from a bank.
The other advantage of construction invoice factoring companies is that they always avail the funds as soon as you request them. For instance if you want the funds within 24 hours you will be able to get it as long as you have clearly stated and agreed to their terms. Most of the factoring companies take a small percentage of the total amount that you were supposed to be paid. For example they will give you 80% of the amount and get 20% as charges for collecting your invoices. This is quiet cheap compared to interest rates charged by most banks.
In general, construction invoice factoring companies have been a great source of relieve for construction firms that were almost closing business due to lack of funding. Before the advent of invoice factoring, it was almost impossible to get large sums of money from as loans from banks because of so many reasons. The advantage of invoice factoring is that the process is simple and anyone can get funds within a very short period.