InsaneJournal

Construction Business Factoring Resurges during a Challenging Economy
Construction business factoring has been used in the construction industry for a long time now and trends have demonstrated that the usage of such a financial alternative is on the rise. The recent economic downturn and tightening of the credit markets has been especially difficult on the construction industry. It is shown that changes in the building code standards and cash flow problems have been crippling small-time contractors. Because the availability of commercial financing has been messy for the past year, this situation is especially evident when seeking construction funding for commercial property.

Recently, there has been a boost in construction factoring among contractors, which provides the much needed cash flow to pay suppliers and make payroll. With factoring, businesses are able to acquire cash based on their current accounts receivables. The usual case is that subcontractors have to wait for 30 - 60 days before they will have available cash from their invoices. Construction factoring advances cash against invoices and provides enough money to pay the bills when things are not that easy.

The granting of commercial loans has become considerably stricter. For several reasons, this has resulted in even more of an apparent shortage of business financing for construction of new commercial property. And even before commercial finance options have gotten into this restrictive stage, construction business factoring is typically perceived as a risky move. The most significant risk factors for commercial construction finance normally include the following: Potential contractor liens are an added risk not present in commercial financing for existing commercial properties. Several construction projects go beyond initial cost estimates and/or take more time to complete than originally anticipated.

Between the two facts noted above, the risk of potential contractor liens is a special lending concern in the current funding climate for commercial lenders due to the deteriorated state of the construction industry. And due to the potential for contractor liens incurred in residential projects, the current problems in residential construction have indirectly affected the availability of commercial properties funding - it's thereby a vicious cycle.

The real estate mantra in this scenario is quite fitting: "Location, Location, Location." The main point in emphasizing location is to illustrate that the use of non-local funding sources can be a viable solution to consider for commercial financing involving both existing properties and new construction. Local commercial lenders, in a few areas of the country, have ceased giving out new business financing and construction financing.

In the negative business borrowing climate that we're experiencing today, it is essential more than ever for small business owners to seek out an invoice factoring company which can discuss the feasibility of obtaining funding help outside of the local lending area. Contractors and related small businesses alike can benefit from single invoice, or spot factoring, stay afloat, and in most cases, grow when using smart financing options.

For more information about business factoring, contact The Interface Financial Group (IFG) at 877.210.9748.