Factoring for the Construction Industry
Factoring for the construction industry is a niche sector of the factoring and invoice discounting market specifically designed to cope with JCT contracts and applications for payment in order to fund subcontractors in the construction industry but this type of finance is only available from a few factoring companies.
Traditionally factoring companies have been unwilling to deal with any company unless the work is complete and an invoice raised but more and more factoring companies have designed facilities that don’t require an invoice to be raised as they are happy with stage payments evidenced by an Application for Payment and if (as is sometimes the case) the main contractor has a clause banning the assignment of the debt the more adventurous factoring companies will offer a confidential invoice discounting facility so that the main contractor is unaware that construction finance is in place.
Most factoring marketing material states that advance payments of up to 90% are available but sadly this is not the case in the construction industry where advance payments of 50% to 60% are the norm for construction finance.
In addition to traditional factoring there are also spot factoring facilities on offer to construction industry subcontractors by some specialist finance companies.
Instead of having to submit each and every invoice / application, spot factoring also known as single invoice factoring is available where one can pick and choose which invoices to factor and also when to factor as the single discount charge is made from the date funding is called off until the debt is repaid so normally the invoice won’t be submitted for factoring until the funding is required.
Spot factoring often allows for higher funding levels as some of the finance companies will offer advance payments of up to 75% of the invoice or application and is particularly effective for construction subcontractors as some of the factoring companies offering this type of finance will accept Applications for Payment in lieu of invoices. Also the contractor can pick and choose which applications or invoices to factor and if they don’t need funding they don’t have to submit any at all as there are no minimum annual charges unlike the more traditional arrangements.
Factoring solutions for the construction industry
Factoring Solutions is one of the oldest established specialist factoring brokers who have been operating since 1999 and we have arranged finance for a variety of companies in the construction industry including electrical contractors, flooring contractors, roofers and scaffolding companies already. We pride ourselves on only placing business with those factoring companies that embrace the construction industry wholeheartedly and not those that may consider it at the moment but are likely to change their minds in the future.
There are several relevant case histories showing how this type of specialised finance helped a variety of different companies.
There are no charges for our services and you have our guarantee that we will only introduce you to one of the few factoring companies that actually perform so why not call us on 01827 707680 to see what we can do for your company.