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Real
Estate
Construction Accounts Receivable
One of the most common challenges a business in the construction field
faces is maintaining cash flow. Yet most businesses are subject to progress
payments, meaning they generally do not begin to receive payments until
30, 60 or even 90 days into the project. The answer to the inevitable
cash crunch is factoring, which is quickly becoming the alternative
financing method of choice throughout the construction industry.
What
is Factoring?
Factoring
means selling your accounts receivable – whether they be invoices,
progress billings, requisitions. or AIA’s – to a finance
company (known as a factor) for a discount. The factor actually buys
one or more of the business’s invoices, advancing cash to the
business, typically 70%. Once the invoice or invoices are paid, the
factor will rebate the balance of the invoice after deducting its fee.
Who
Can Benefit from Factoring?
Contractors,
subcontractors, suppliers, and every other small to medium-size construction-related
business can benefit from factoring.
How
Can the "Quick Cash" Available through Factoring Be Used?
Construction-related
businesses can use the funds available to them through factoring to
pay their workers, make tax, workers’ comp, union dues, and insurance
payments…and buy the materials necessary to complete their jobs.
It can help a business that is facing a cash flow shortage survive –
and it can help a business grow by providing the funds needed to go
after new jobs and new markets.
Contact us now for a free consultation!
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