The construction and building industries have always been frowned upon by factoring companies due partly to the contractual nature of “the product” but also because many subcontractors within the industry use Applications for Payment instead of invoices.
Some factoring companies will grudgingly look at construction subcontractor proposals if there is additional security available and some will also take on this type of business if they need to boost their figures but problems arise when they find they can’t cope with it properly so start reducing the payments to lessen their exposure.
Luckily there are a couple of factoring companies that will look at subcontractors in the building industry wholeheartedly and we have successfully placed quite a number of enquiries in the past few months including the following:-
New start dry lining company in March forecasting first year’s sales of £250,000. By the end of the year this company had managed to increase sales to it’s current level of £1m despite all of the doom and gloom in the building trade.
A resurfacing company in a CVA turning over £5m was successfully placed with a high street bank factoring company.
An electrical contractor turning over £20m who had factored a few years earlier when much smaller was also placed with the same bank owned factoring company.
A couple of months ago we were approached by two companies in the building industry. The first was involved with structural repairs turning over £1m and factoring with a small factoring company but desperately unhappy with the service and levels whilst the second was a roofing contractor turning over half that sum who had fallen out with their factoring company RBS Invoice Finance as the financier in turn fell out of love with the building industry.
The sad thing about the second company is that they were so desperate for working capital they didn’t wait for the factor that we introduced them to quote for their business but signed up with a factoring company that they had found via another broker as they were already quite a long way down the route. Unfortunately that factoring company was the one that the structural repair company was so desperately trying to escape from.
A third company operating as drainage contractors had received an offer from RBS Invoice Finance in the same month which they withdrew the day before they were due to sign the agreement as they belatedly realised that they didn’t like the industry. We had a desperate telephone call on a Saturday morning to tell us that they had been let down and asking us whether we could do anything quickly. We managed to get them signed up and paid away by the following weekend.
Just to complete a successful month we had a fourth enquiry from the building industry, this time an electrical contractor turning over £4.5m but this wasn’t quite as straight forward. Nevertheless an offer was made within the week which is now being considered.
Our services are completely free of charge so if you are involved as a subcontractor in the building and construction industries and are interested in factoring or invoice discounting please do not hesitate to contact us for an informal chat to see if we can help.
Factoring Solutions
5 Torridge, Hockley, Tamworth, Staffordshire B77 5QL
Tel: 01827 707680
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This post was written by Ian on January 11, 2009
hmmmm I like this post but I would love to see some on how to save on construction costs in this tough market