Construction Industry Tips: Finance | Factoring

Construction Industry Tips: Finance

If you are in the construction industry and provide business-to-business services, you are likely to come across a few problems which many of your industry associates will have also come across. This can be especially true if you are a small or medium sized firm that often have less finance power than larger counterparts.

The key to overcoming these problems is to know some of the solutions available, as like I mentioned, many companies have already come across these problems and found a way to overcome them in recent times.

Six common problems for the construction industry:

1. Large projects cause cashflow issues as you struggle to pay the significant costs such as those associated with wages and raw materials without first having the cash from the invoice.
2. You are not benefitting from supplier economies of scale discounts like you should be, perhaps putting you at a pricing competitive disadvantage.
3. Banks are slow and unwilling to supply you with a loan or overdraft.
4. You want to expand but cannot afford to pay for the equipment or tools (known as assets).
5. You struggle to find the right kind of employees who can supply you the skills you need for a project and cannot afford to pay the rates for skilled individuals.
6. You would love to train someone up but do not have the cashflow to afford the costs involved.

With construction jobs seemingly being the first thing to be dropped by struggling firms, it can feel like a serious struggle. However, there are a few finance solutions which may help you overcome the common problems which occur within the construction industry.

Common construction Industry cashflow solutions:

Invoice finance ? Invoice finance is a solution which can solve almost many of the problems caused mentioned above. In effect it can completely remove and bypass the dependency on an overdraft. It works by an invoice finance company providing you with a percentage cash advance on your invoice (usually up to 90% of your invoices? value). The invoice is used as the security as the lender knows you should (eventually) be getting the money in, and less risk for them less security is required by you. This can be a very positive point as no one enjoys securing a loan on a family home or premises as banks often ask for.

After you receive the cash advance, you can spend it on whatever you need, whether it is to pay wages, suppliers or to fund for growth (buying equipment for example). You can choose either factoring, where the lender collects the debt from your client for you, or invoice discounting, where you are left to collect the debt yourself. Either way, once the debt is collected, you are given the remaining balance of the invoice (the 10% if you took a 90% advance), minus lenders fees.

To find out more about invoice finance, call our experts on 0845 017 7524 or fill in our short quote form for instant feedback.

Spot factoring ? Spot factoring is a type of invoice finance. This product allows you to pick and choose a few major invoices over the year rather than having all of your business conducted through invoice finance. If you have ten projects to do over a year you may only want to factor one or two project ? with spot factoring this is perfectly reasonable.

If you would like to know more about spot factoring, our experts provide you with no obligation, confidential advice.

Asset Finance ? Growing your business may mean purchasing new equipment and tools, which can come at a hefty price, especially if you want to provide your clients with the best quality service. Asset finance aims to make purchasing equipment affordable and simple. You may want to look into leasing, allowing you to use equipment as you usually would but for a small monthly fee. Alternatively you may want to use a hire purchase agreement where you pay monthly for equipment until the end of the contract, which is when you own it outright. It must also be pointed out that you can re-finance some of your existing assets. For instance, a piece of machinery worth ?50,000 may be worth re-financing as you can receive a cash lump sum of maybe ?40,000 to be paid back monthly for an agreed period.

Find Finance Solutions by being aware and taking action

Construction is often not associated with products such as invoice finance, but it is in fact a product which fits the industry well. Spot factoring helps keep invoice finance a flexible product meaning it can be tailored to most construction businesses. If you suffer from any of the problem within this article and think these products can help you, the first step to solving the problem is to give us a call.

Call our experts on 0845 017 7524 for a no obligation, confidential call.

Alternatively ?fill in a quote form and enjoy a call back from our experts.

We can offer you financial solutions to help keep your cashflow healthy. Request a quote now to find out how much invoice finance can save you.

Request a quote online

Source: http://www.factoring.org.uk/construction-industry-tips-finance

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