Contracting can be a risky business and when it comes to finances in the past the small contractor was left on his own to borrow from family members or friends because the bank would not even consider giving a small contractor a loan. They often turn a deaf ear to large contractors, as banks only like to give loans to safe borrowers.
So, where does this leave the small contractor, it leaves him living from one job to the next because its difficult to have the extra means to sell more jobs before the first one has paid for materials and expenses. Today it is different because there is construction factoring, this allows for more working capitol and that means the small contractor can sell more jobs.
There is also a difference because the construction factoring company understands the pitfalls such as weather related setbacks causing a job to continue longer than estimated or plans that change causing more work. What the contract factoring company is able to do is purchase the accounts receivable invoices and charges a factoring fee that the small contractor is able to live with and this puts the cash in his hands that is needed for materials and to pay employees.
This enables the current project to proceed without stress and also frees up time from going from family member to family member to borrow. This of course keeps the small contractor from being the person everyone dreads seeing to the guy who has the time to go and give estimates on other projects that can be lined up for when the current one is finished.
It is also a win-win situation for the small contractor, he has a place that understands the business and the hold ups there can be, they are not a lender that will charge exurbanite amounts of interest because it is still impossible for the small contractor to go to a bank to ask for a short term loan. Plus with the ability to cover all the expenses for a project for a small factoring fee the small contractor can be doing many more projects in a short amount of time. Unless there is a weather hold up, a change in plans or a material hold up the project can run smooth and on time.
Its tough for the big contracting company to have the necessary cash flow all the time to run projects and pay employees and they have more of an advantage in the loan department than the small contractor short of putting a second mortgage on their home they have no chance at a bank.
Since construction factoring has come into play there are many more small contractors that are able to stay in the contracting field than ever before because expenses can be covered when putting this type of financing into play. In the past there have been many good craftsmen that had to leave a job that they were good at and enjoyed to enable them to keep their bills paid on time.
For more information about construction factoring, government factoring, and invoice factoring, please visit our factoring company website and all the factoring services we provide at: http://www.capitalplus.com/ |
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