Everyone knows about bank loans as a source for increasing your working capital but often times many contractors and construction company owners don’t know much about construction factoring. Construction factoring can help alleviate the stresses of maintaining your cash flow when your customers can take 30, 60 or 90+ days to pay you. With construction factoring, the factoring company will provide you with immediate funds for your unpaid invoices giving you the piece of mind of knowing when you will get paid.
Below are 7 common myths about construction factoring. When you are looking for a factoring company to partner with you will find that these are not always myths for every factoring company but for the right partner they will be.
1) I have to factor a minimum number of invoices a month to qualify.
No. Some factoring companies don’t require a monthly minimum. You can factor as many or as few invoices as you want to each month or even skip a month if you choose.
2) I must commit to a long-term contract.
Nope. With some factoring companies you don’t have to commit to a long-term contract. You can decide when you want to use factoring.
3) I have to factor all my invoices.
No. You will find some factoring companies let you chose which invoices to factor including which clients you factor and when.
4) I have bad credit so I won’t qualify for construction factoring.
Not true. One of the great advantages of construction factoring is that the factoring company will take into consideration the creditworthiness of your clients and not the creditworthiness of you or your company.
5) I will have to pay a fee to apply regardless of if I qualify or not.
No. With the right factoring partner there will be no application fees because you should not have to pay to put in an application.
6) I have only been in business for one year so I won’t qualify.
Not true. Since the factoring company receives the payment from your client they look at the credit history of your client and not your business, so even new businesses can qualify for factoring if they have creditworthy commercial clients.
7) Factoring will negatively impact my relationship with my clients.
Nope. The factoring companies success is directly related to your success. The last thing they should want is for you to lose a valuable customer. For the factoring company maintaining your customers’ goodwill and confidence should be extremely important.