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6 Construction Fun Facts

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Construction is much more than the assembly of buildings and infrastructure. It is how we shape the world around us, but the process, technique, and scale have all changed drastically from the centuries before us. The construction industry both drives the economy and indicates its health. Here are some fun facts about both modern day and historical elements of the construction industry:

The construction industry in the US is worth 1.18 trillion dollars
This figure is up 3.1% from January 2016. The US census says that this number is 59% nonresidential and 41% residential.

The US construction industry employs roughly 7.9 million people
Between April 2006 and January 2011, the construction industry eliminated more than 40% of its workforce, cutting nearly 2.3 million jobs. Unfortunately, a significant portion of those workers haven’t returned. However, construction employment is expected to go up as firms replace jobs lost when the recession hit.

The Middle East will be the fastest growing construction market in the world in 2017
Markets like Qatar, UAE, Oman, and Egypt are projected to grow at around 6% this year, almost 2x more than the US market grew last year. The United Arab Emirates is poised to reclaim its title of largest projects market from Saudi Arabia due to financial constraints in the kingdom.

Honolulu will continue to expand
After an increase of 20% in employed construction workers in 2016, Honolulu will continue to employ laborers to start on the backlog of projects set to begin in the capitol of the USA’s 50th state.

Concrete is the most used material in construction
Dating all the way back to Ancient Egypt, concrete is the most used construction resource in terms of volume. Thomas Edison had 49 concrete patents and experimented with precast concrete houses filled with concrete furniture, pianos, and refrigerators. Some companies are even putting agents in concrete to make it smell good!

Factoring is one of the best ways for construction companies to increase cash flow
For construction firms, both large and small, starting new jobs and making payroll can be an issue when you haven’t yet received payment for your previous job. An easy fix, regardless of your credit history or bankruptcies, is factoring! An experienced and specialized company will buy your invoice and allow you to start new jobs or take care of previous debts weeks before you would initially have received payment.


I hope you enjoyed just a few of the countless interesting facts that the construction industry produces, and will continue to do so as long as civilized societies exist. None of these facts would exist without a way for construction firms to obtain capital, and if your cash reserves are low and a traditional bank loan isn’t in the cards, factoring may be for you.

 

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Getting Access To Capital for Bonded Work

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Imagine this: your firm just landed its biggest contract; everyone is ready to get out there and begin working, you just need to secure working capital to help you cover the additional payroll and material expenses. Then you find out that a surety bond is being required by the owner. This makes it seemingly impossible to receive funding and begin the job that will grow your business. Do not fret; there is a solution to your problem! With the help of the right partner, you can get access to the working capital your business needs even for bonded work.

Lets start with the definition of a bond as it pertains to the construction industry: A type of surety bond used by the owners or General Contractor  in construction projects to protect against an adverse event that causes disruptions, failure to complete the project due to insolvency of the contractors or subcontractors, or the job's failure to meet contract specifications.

Access to capital on bonded work is usually divided into two categories.  Are you the bonded company or is the general contractor bonded? If your firm is the bonded company, it can be tough to acquire capital, as the bonding company’s rights to the receivables from the Owner or General Contractor supersedes the rights of the lender. Although it may be difficult, there are companies that specialize in financing for the construction industry, such as CapitalPlus Equity. These experienced companies have the expertise in the construction industry to help a bonded firm acquire the working capital they need to take on new and larger contracts.

BUT if your general contractor is the one that is bonded, it is much easier to receive funding. This is because the payments from the bonded GC are basically insured from the bonding company. In this scenario, it works in your favor and makes it easier to increase your cash flow and begin new jobs.  

In short, it makes it easier for you to get funding when your GC is bonded than it is if your company is bonded. It is much riskier for lenders to fund bonded companies. However, all hope is not lost when you find partners with the experience and expertise in financing for the construction industry to help you navigate these issues. Without access to capital, it makes it much harder for new and smaller construction companies to bid on and win more and larger jobs due to lack of cash flow. If your firm works on bonded jobs, consider partnering with a company that specializes in the construction industry, such as CapitalPlus Equity, who can help you get the working capital you need to expand your growing business.

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The construction industry is one of the oldest professions, and a lot of things have changed over the years. One of the ways construction has changed is how companies and jobs are financed. Many construction company owners and contractors are only familiar with traditional bank financing options with rigid terms, but luckily there are alternative options available. We would like to debunk some of the myths about financing for construction companies and contractors that can help you build towards success.

You can’t receive financing if you have a pay-when-paid contract – FALSE
It is true that a pay-when-paid contract makes things more difficult when trying to get funding, but it does not make it impossible. The challenge with paid-when-paid contracts is that there isn’t a set date for receiving payment and there are a lot of other variables that come into play, and that makes things risky for the vendor. Although these obstacles are in place, there are funding sources that will work with you. Your best option is to look to partner with a financing company specializes in helping construction companies, and contractors get financing as opposed to a general finance company. These companies know the complexities of the construction industry and will help you get the working capital that you need to start jobs both big and small and grow your business.  

You can’t receive funding if a job is bonded – FALSE 
So you’re a subcontractor, and your general contractor is bonded, can you get capital? The answer is yes. With the right financing partner, such as a construction factoring company like CapitalPlus Equity, you can get funding even if your jobs are bonded.

You have to have a certain credit score and have been in business for a while to get financing for your business – FALSE
If your company partners with a factoring company, they will receive payment directly from your client, allowing them to use the credit history of your client and not your business. This way you will receive funding if you have creditworthy commercial clients regardless of your credit score and age of your business.

In conclusion, even if you have been turned down by a traditional bank or think you won’t be able to find a financing option, there are alternatives available to all construction companies and contractors. One possible solution is to use factoring to receive capital.  Factoring companies can help you increase your cash flow while allowing you to cover payroll expenses, purchase materials and take on more lucrative jobs and don’t have the same limitations of a traditional bank.

 

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I recently spoke with an electrical contractor who was struggling with cash flow and was looking for help. They had recently started working with a merchant cash advance company and did not realize the major effect it would have on their cash flow. They thought that it was their only option to get access to quick cash and were now in an even worse situation than before they started working with them.  This seems to be a reoccurring situation we are encountering with the recent rise in the merchant cash advance industry. 

What is a merchant cash advance?  
Any form of accessing capital for your business that pulls funds automatically from your business either via your credit card processing or your bank account. Often times they will claim it is not a loan; however, they are giving you money up front that you will then have to repay and you will lose control of when and how you make the payment. This form of financing is often unregulated and carries with it an extremely high interest rate of 15%-39+% AND monthly maintenance fees.

How does a merchant cash advance affect my business?
For many small and new construction businesses there is a concern about cash flow. It can be very difficult and time consuming to apply for a bank loan or line of credit and forget about it if you have been in business a short time or have not so great credit. Some of these businesses turn to cash advances because with them those issues seem to be solved. There is very little paperwork and high approval rates. With that quick and easy turn around comes a very high cost that can be confusing and often overlooked. The cash advance companies tend to be unclear about how they present their interest rates. They will often position it by telling you they will take 10% of your account or sales each day so it appears that it is a 10% interest rate when in fact it can be upwards of 39% or more.

I regularly speak with contractors and subcontractors who did not realize the impact having money automatically taken out of their bank accounts would have on their business and their cash flow moving forward. For contractors who were already having periods of difficulty with their cash flow, having another regular drain on their account can be detrimental and we even recently heard from a contractor that was forced into bankruptcy after working with a cash advance company.

For the many contractors and subcontractors we hear from who have partnered with a cash advance company and still need additional help unfortunately the fact that they are working with a cash advance company makes them ineligible for our factoring services. Reducing further their options and cash flow headaches.  

What options do I have for my business?
The best option for your business is to only use a cash advance company as a last resort if you absolutely have to. If your business is having cash flow challenges you should exhaust all other options before approaching a cash advance company. Options such as factoring or equipment leasing can help give your company the cash flow assistance you need without draining your bank account in the process.

 

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Starting your own business can be one of the most rewarding endeavors you can ever take on, but it can also be one of the most challenging. Using the vast wealth of knowledge that you have accumulated over the years, you can become your own boss and put your dream into action.

Here are some tips to help you start building your construction business:

Do Your Research: Set specific goals for your construction business and establish steps on how to achieve them. Know your target market and how you plan to market your services to them. If some of these tasks seem daunting or unattainable, acknowledge that and surround yourself with experienced team members, or a mentor. Many organizations also offer help to small companies that are just starting up, such as SBA. You can also look to outsource these tasks to help lower your overhead as you get started.

Generate Capital: Ensuring your new construction business has the working capital it needs is critical to your success. Generating the capital can be difficult because your new business will have little to no credit history and many traditional lenders want to see a proven track record. If cash flow is a reoccurring problem for your new construction business, invoice factoring could be a viable solution to help your business get access to much need working capital. Factoring looks at the creditworthiness of your commercial clients and can be utilized even when your business has little to no credit and even poor credit.

Find Quality Labor: One of the biggest problems facing many construction companies across all trades is finding quality labor. To ensure you have the talent you need to compete for new contracts you can:

1. Take an active approach to hiring and recruiting employees.

2. Seek out and hire military veterans.

3. Continuously train employees both old and young.

4. Make your companies presence known at local universities, community colleges, and high schools.

Develop an Effective Safety Plan: Employees are more likely to stick around if they do not feel in danger while on the job. First identify all safety requirements required by law and inform your employees thoroughly. Another option that could benefit a new construction company is an on-site consultation firm to help adhere to industry standards.  

Be Prepared for Growth: Taking advantage of key opportunities can make or break your new construction company. One large contract can put you on the map and grow your business, and there are tools to help you be prepared. Partnering with a factoring company can help ensure you will have access to immediate working capital so you can take on that new contract and not worry about how you will cover your expenses while you wait to get paid.

Only Work with Creditworthy Partners: This can be easier said than done; however, for new construction companies working with just one client who does not pay you can mean the end of your new business. Make sure you are researching each new potential client, supplier and subcontractor to protect you and your business. One fairly unknown benefit of partnering with a factoring company is they will run credit checks on your potential clients to help ensure you will get paid.  

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May is once again upon us, which means the flowers are blooming, the temperature is heating up and it is once again Small Business Month. With that in mind, we wanted to salute all the small businesses in the construction sector and provide 15 things every small business needs to know about construction factoring.

  1. The number one most important thing you should know about construction factoring is that it gets you immediate access to the working capital you need.
  2. For construction factoring to work all you need are unpaid invoices and creditworthy commercial clients.
  3. Construction factoring does not look at your credit but the creditworthiness of your commercial clients.
  4. Building off of number 3, it also means that you could be eligible for construction factoring even if you have bad credit or little credit or are a new business.
  5. You can use the funds to pay for supplies, cover payroll, pay subcontractors or any other business expenses you have.
  6. When you find the right construction factoring partner there are no hidden fees including no application fee, no upfront fees, no wire fees, no hidden charges and no interest charges.
  7. You can find construction factoring companies who will offer you no long-term contracts, no monthly minimums and no penalties for non-usage.  All of which puts you in the driver seat of your construction company’s finances.
  8. It is important that you find a partner who specializes in your industry because they will know the ins and outs and be a valuable resource to you since they truly understand your unique business challenges.  
  9. Construction factoring provides your business with the ability to bid on larger jobs that you otherwise might not because of your limited access to working capital.
  10. Unlike many traditional financing options construction factoring companies will work with you even if you have paid when paid contracts and progress billing.
  11. A construction factoring company will pay and obtain lien releases from your suppliers and subcontractors providing you with an extra level of protection.
  12. Construction factoring companies implements checks and balances to make sure the projects are being completed as planned. This helps to ensure that everyone is on the same page; the work has been completed and is satisfactory on a regular basis.
  13. With construction factoring it only takes a few days to set up an account and once your account is set up you can expect to get cash in about 24 hours. The quick set up also includes only minimal paperwork and documentation. All of which is much different than when you try to get a traditional bank line of credit.
  14. Construction factoring is very flexible when considering your account limit since the limit is based on your accounts receivables. This means that your limit can grow with the growth of your business.
  15. The right construction factoring company can also assist your company with services other than factoring.  Some offer lien compliance, credit services and bookkeeping services to compliment the factoring.    

I hope this has given you invaluable information about construction factoring and shown you many ways in which it can benefit your business. We have had the pleasure of helping numerous small businesses in the construction sector get the working capital they need to grow their businesses utilizing construction factoring. If you business could benefit from these services I encourage you to consider it as well.

 

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If only running a construction company were as easy as just getting the job done. But unfortunately along with it comes the responsibility, or headache, of the financial aspects of the business as well.  Here are 6 financial challenges that construction companies, contractors and subcontractors typically face.

  1. Access to lines of credit – For many years banks have been hesitant to lend to construction companies especially on paid when paid contracts and progress billing.
  2. Inability to be flexible – Mainly due to cash flow, scheduling and staffing constraints, many in the construction industry find it hard to be flexible in regards to the job once it has started.
  3. Managing cash flow – It can be very hard for construction companies, contractors and subcontractors to manage their cash flow when many clients can take 30, 60 or 90+ days to pay and you have expenses such as materials and payroll to pay in advance.
  4. Unmanaged growth – It can sometimes be challenging to manage the growth of your business when winning one large job can be a game changer for your business.
  5. Credit Score – Just like your personal credit score your business credit score is an important consideration. You need to make sure you are paying your bills on time so that you have a preferable score as it can impact your ability to borrow money for things such as new equipment. Additionally, it can impact potential business relationships. You may find that certain suppliers and subcontractors won’t take the risk of working with someone with a poor credit score since it is an indication of your ability to pay.  
  6. Credit History – If you are a new business it takes time to build a solid credit history.

Partnering with a factoring company can help alleviate many common financial challenges that construction companies, contractors and subcontractors face. For example, a factoring company can get you immediate access to working capital that can help you manage your cash flow, allow you to be more flexible, manage your businesses growth and pay your bills.  The factoring company will do all this and not look at your credit history when evaluating your application; instead they look at the creditworthiness of your customers. Factoring companies who specialize in the construction industry will also lend on paid when paid contracts and progress billing unlike many traditional lending sources.

 

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7 Myths About Construction Factoring

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Everyone knows about bank loans but often times 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.

 

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Working Capital for Demolition Contractors

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There comes a time that every demolition business could use more working capital for things like making payroll, buying supplies or taking on bigger or new jobs. It can be challenging for demolition contractors to wait the 45, 60 or more days for customers to pay their invoices and the economic climate over the past few years has made it hard for you to get a bank line of credit. Fortunately, demolition contractors have another option, accounts receivable factoring. Factoring can provide relief to your demolition business by giving you access to immediate working capital without your customer having to pay quicker than they normally would. Additionally, factoring allows demolition contractors to consistently meet their payroll, pay vendors timely, buy supplies and bid on more jobs they otherwise couldn't.  

The Four Easy Steps to Accounts Receivable Factoring
Accounts receivable factoring can provide your business with a continuous source of operating capital, here is how it works:

  1. You send your invoice to your customer and a copy to the factoring company.
  2. You receive up to 80% of the invoice from the factoring company.
  3. The factoring company collects payment from your customer when the invoice is due.
  4. The factoring company pays you the balance of your invoice amount, less a fee.

Benefits of working with a factoring company

If you go to a bank for a loan they will consider whether your company is financially sound, factoring companies don’t look at the size of your business, how long you have been in business or your creditworthiness. In fact, factoring companies look at the creditworthiness of your customers. If your business has a creditworthy commercial customer base with unpaid invoices you can benefit from factoring.

Additional benefits of accounts receivable factoring:

  • The demolition business owner does not incur any debt as they are “selling” the receivable as long as their customer pays the invoice.
  • You are able to take advantage of early payment discounts from suppliers, as the factoring company will often pay your creditors right away.
  • You no longer need to offer early payment discounts because you are getting payment right away from the factoring company.
  • The factoring company will do due diligence on your customers making sure they are credit worthy so in turn giving you often free professional credit monitoring of your clients.
  • You can concentrate on building your business and making money instead of wasting your time worrying about when you are going to get paid.

Accounts receivable factoring may not be the first option you thought of when thinking of a working capital solution for your demolition business but it can be the perfect solution to your cash flow challenges. There truly can be no downside. It can be just what you need to get the cash for your demolition business to make payroll, buy supplies, pay vendors and grow your business.

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Many contractors experience seasonal downtime regardless of your trade. If you are not taking this time as a well deserved extended vacation, there are several ways to maximize the downtime and set your business up for success once things heat up.

Get your finances in order
There are several things to tackle related to your finances including making sure you are up to date with payments, your clients are up to date with paying you, your expenses have all been accounted for and that you have financing lined up for the upcoming busy seasons.

If you are struggling to get financing for your business or are just looking for an alternative funding source, now is the time to do your research to see what options might be best for you and your business. One you might not be as familiar with is construction factoring. With construction factoring you get immediate funds for your invoices and won’t have to worry about when your clients are going to pay you. Additionally, factoring companies may also help you by paying some of your suppliers, taking another thing off your to do list. 

Secure the equipment you will need for your busy seasons
Now is the time to assess the condition of your current equipment and what new pieces you may need for your upcoming jobs. Take the time to research your different options for acquiring the equipment such as making a cash purchase, taking out a loan or leasing. Each option has different pros and cons so make sure you look at everything from how each option impacts your current cash situation, how it will impact your working capital going forward including if you will have to budget for possible maintenance and how each option effects your taxes.

Secure partnerships and build your network
Take the time to make those phone calls that you always put off when you are to busy to different suppliers, subs and others who you could partner with to make things easier and help you grow your business. Since you are not tied to a job site have lunch with someone who might be able to help you land a new job or attend a local networking event. 

Get your team in place and sharpen their skills
Your team is your most valuable asset and you can’t get through the busy times without a great group of people you can count on. When things get busy it is easy to make quick decisions on new hires that may or may not work out. While things are slower take the time to make sure you have the right people on your team and if you need to make some changes take the time to thoroughly vet to candidates.

For those team members you really value, including yourself, check out if there are additional skills they can acquire or new certificates they can work towards while things are slow. 

Develop a marketing plan
While things are busy it is easy to live in the here and now and not worry where your next job is going to come from. But when things slow down that can easily turn into the only thing you think about. Instead of just worrying about it, use this time to develop a marketing plan that can carry you through the next twelve months and generate enough jobs to keep you busy and help you grow your business. Make sure you consider all options including print, email, online, social media, publications and your website. 

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Around this time of year with the focus, in so many of our lives, around our families I can’t help but think about how much of what we do at CapitalPlus Equity that affects contractors, their families and their dreams.  Whether that’s parents working hard in their own construction company to leave it to their children or children who have recently taken over the construction company from their parents and want to grow the family business. It amazes me how our small business helps so many other small and growing contractors and construction businesses.

With that thought, I wanted to share with you a story of a construction company who was a CapitalPlus client.

Who?
Brian and is wife had been the proud owners of a construction company in New York.

What?
After 35 years of successfully owning their business, they were looking to retire and pass the business on to their two kids. They have been working hard to grow the business so that it could support their kids’ families for many years to come. 

How?
Several years ago Brian called CapitalPlus Equity and we have been able to provide him with the working capital he has needed to bid on more and larger contracts than he otherwise would have.

Why?
Brian has been able to grow his business with the help of CapitalPlus Equity providing constant and consistent working capital and now feels confident he can pass his business down to his son and daughter and provide them with a way to support their families for many years to come.

If you are trying to grow your construction business, like Brian was, then construction factoring might be the solution you need. 

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For many new, small and growing plumbing contractors access to working capital creates a real financial headache. With this problem there are two items to consider:

Item 1 – Expenses
Your employees, vendors and suppliers have their own payment terms and if you don’t pay them on time you risk loosing them.

Item 2 – Unpaid Client Invoices
Most plumbing contractors find that their clients take 30, 45 or 90+ days to pay their invoices. This can mean you are waiting on funds for upwards of two months even though you have had to pay your expenses much quicker.

What working capital options do plumbing contractors have? 
Banks have not been lending to plumbing contractors so where else can you turn if you don’t have enough working capital on hand to cover all your expenses?  One option to consider is construction invoice factoring, also known as accounts receivable factoring. With invoice factoring for plumbing contractors, a factoring company could provide you with immediate access to working capital by using your unpaid invoices as collateral. Invoice factoring is often a perfect match for new, small and growing plumbing contractors because all you need are credit worthy commercial clients, as factoring companies look at the credit history of your clients and not your business.

For plumbing contractors who choose to work with a factoring company the process is quite easy. There is typically a short application process, which can take only a few days or weeks depending on how quickly the needed documents are submitted. Once the application process is complete, each time you submit an invoice, for an approved client, you get the funds within hours. All you have to do is submit a copy of your invoice to the factoring company when you submit the original invoice to your client. 

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Have you ever considered how the creditworthiness of your customers can impact your bottom line? How about how their cash flow can impact your bottom line? When you consider that according to a survey by RocketLawer, 43% of small businesses have customers who are more than 90 days late on a payment, it might be something you should give a second thought to.

For contractors and construction companies who are looking to take on new jobs to maintain and grow their businesses, winning the bid can often make you forget to worry about the possible risks you could face. One risk is that when you are extending payment terms and not being paid in advance you could be taking on the financial challenges of your new client without even knowing it. This applies to your existing clients as well because any company’s financial standings can change at any time for various reasons. 

Their creditworthiness
The fact that your client’s creditworthiness directly impacts their ability to pay you may be obvious but many contractors and construction companies often overlook it.  You can get this information in a credit report, which gives you information on the business’s trading, credit and financial histories. It also provides a credit rating and limit. All of this can prove to be invaluable information when assessing if you want to work with the client and what payment terms you want to extend. 

How long they take to pay
How long your clients take to pay you impacts your bottom line because it impacts your cash flow. Since there are many expenses, such as materials and payroll, which contractors and construction companies have to cover in advance of being paid by your clients you must manage your cash flow closely. So when your clients stretch out the payment terms and don’t pay for 45, 60, 90 or more days you are stuck having to cover those expenses and stress your cash flow. 

How to protect your business
One option to protect your business and arm you with the information you need to determine what clients and potential clients are creditworthy and to get paid more quickly, is to partner with a factoring company.  When you partner with a factoring company, they handle all the due diligence needed on an ongoing basis. They do this by conducting credit checks that can provide the information you need to make the best decision about what clients you want to work with. The will also give you immediate access to the funds from your unpaid invoices so you don’t have to worry about how long your clients take to pay allowing you to more easily manage your cash flow.

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With many banks turning down loans for landscaper and snow removal contractors you might be wondering what options are available for you to get access to much needed working capital. Invoice factoring, also known as account receivable factoring, could be the solution for you as it works for any business that invoices their credit worthy commercial clients. 

Without a loan from a bank, many landscaper and snow removal contractors have to continually find the funds to make payroll, purchase supplies and pay vendors. Since your capital is tied up waiting 30, 60 or 90+ days to collect on invoices it can be very challenging and limit your ability to take on other jobs and grow your business. Invoice factoring can provide you with immediate access to cash, eliminating the long wait and giving you the funds you need and removing the burden from your shoulders.  

For landscaper and snow removal contractors who choose to work with a factoring company the process is quite easy and much faster than working with a traditional bank. There is typically a short application process, which can take only a few days or weeks depending on how quickly the needed documents are submitted. Once the application process is complete, each time you submit an invoice for an approved client, you get the funds within hours. All you have to do is submit a copy of your invoice to the factoring company when you submit the original invoice to your client.

Landscaper and snow removal contractors no longer have to worry about how they are going to get access to much needed working capital to meet their financial obligations and grow their business. All they need to do is partner with a factoring company who understands their needs and can be the valuable partner they were missing.

 

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Construction Invoice factoring is a great way to get immediate cash for your unpaid invoices. However, there are a few common obstacles that many contractors and construction companies encounter when trying to factor their invoices.

Your customers are not credit worthy
One of the benefits of construction factoring is that the factoring company typically looks more so at the creditworthiness of your customers than of you and your business. For many contractors and construction companies who utilize invoice factoring, this allows them to get the funds they need that they otherwise could not have. However, for those companies who do not have creditworthy customers, unfortunately this still won’t be an option.

Since factoring companies do often provide free credit checks on your customers you can benefit by getting valuable information to evaluate who you want to continue to do business with.

Your customers will not sign the Notice of Assignment 
You might submit all the necessary paperwork but if the debtor (your customers) will not sign the Notice of Assignment, the factoring company cannot move forward and this can ultimately put the brakes on you getting funding. By signing this document, the debtor is acknowledging and agreeing that the factoring company has purchased your receivables and payment will be sent to the factoring company. 

The information provided in the Invoice Verification shows that issues have arisen including work is not complete or subs are owed more money than the advance amount.
When the factoring company sends the invoice verification to the debtor and they return it stating that the work has not been completed, or any other requirements for payment have not been completed, the factoring company cannot move forward. Your customer my also reveal that there are subs/suppliers who need to be paid. Since they are paid at funding directly by the factoring company, this amount has to be at MOST equal to the advance. If subs/suppliers need to be paid and the amount totals up to more than the advance amount, the factoring company cannot move forward, because you are not factoring enough to cover the subs/suppliers. 

Payment is not sent to the factoring company
In order for the factoring company to send the remainder of the funds to you, or to continue to fund your invoices, they must receive payment in full from your customers. When payment is mistakenly sent to someone other than the factoring company, release of the remainder of the funds can be delayed. Payment must be sent from your customer directly to the factoring company. 

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Your employees are critical to the success of your business. So what do you do if you don’t have the working capital to pay them? Many contractors are faced with this dilemma for several reasons including seasonality changes in your business or because you are growing and taking on more and or bigger jobs. In order to hold on to your employees when cash flow is slow there are a few things you can do to help try and prevent them from leaving.

Invoice Factoring 
Invoice factoring turns your unpaid invoices into immediate working capital, regardless of your credit history or company size, eliminating the need to wait 30, 60 or 90+ days to get paid. Factoring allows you to use the funds to grow your business and cover operating expenses such as payroll, vendor payments and tax payments.

Factoring your unpaid invoices is easier than you may think and can help you make money instead of waiting to get paid. Here is how it works: 

  • You invoice your customer and send a copy of the invoice to the factoring company.
  • The factoring company sends you cash, this is usually up to 80% of the value of the invoice and you receive it quickly, often in a matter of hours.
  • The factoring company waits for your customer to pay them.
  • Once the factoring company receives payment for the invoice they send you the reserves less a fee.

Where banks will consider whether your company is financially sound when deciding to approve a loan, factoring companies don’t look at the size of your business or your creditworthiness. In fact, factoring companies look at the creditworthiness of your customers. If your business has a creditworthy commercial customer base with unpaid invoices you can benefit from factoring.

Equipment Leasing
There are a few ways that partnering with an equipment leasing company can help free up working capital to pay your employees if you currently own equipment. A sale–leaseback is one option. With a sale-leaseback an equipment finance company purchases equipment from the company currently owning and using it. The leasing company then becomes the lessor, and leases the equipment back to the original owner, who is now the lessee. In other words, the leasing company buys your bulldozer from you outright, then leases it back to you at a lower monthly payment freeing up capital for your business.

Cut overhead
There are many expenses that factor into your overhead and some are truly fixed but others might be able to be lowered. Can you cut salaries or eliminate certain positions? With fewer staff is there equipment you no longer need? Can you cut down on your office space? Any cut you can make can free up cash that can help cover your other expenses such as payroll.    

For contractors struggling to cover payroll once you are able to find an immediate solution you would be wise to take a look at your business and see what plans you can put into place to ensure it won’t happen again. Can you restructure your staff, change your pricing, or change your vendor relationships? By examining all of these things and others you could put your business on a more secure financial path. 

   

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Tips For A Smooth Factoring Application

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The first step in working with a factoring company is the factoring application. The application usually consists of information including company name, contact information, type of business and information about your customers.

The factoring application will give the factoring company the information it needs to evaluate if your business is a good fit for their services. The smoother the application process is the faster your company can start factoring your invoices and the quicker you get the funds you need.

There are several things you can do to help ensure a smooth application process:

Make sure all information is complete and all information provided is accurate.
The application process could be delayed if the factoring company needs to follow up with you regarding questions that have not been answered or information is missing. All information requested on the factoring application is critical for the factoring company to evaluate your business.  Additionally, if the information provided is incorrect it could slow down the due diligence and underwriting process that the factoring company goes through to verify all of your information.

Include as much documentation as possible including AR, AP, Balance Sheet, P&L, etc
All of these items are needed when looking at your application so if you provide them quickly and upfront the factoring company won’t be delayed in reviewing them.

Be forthcoming when answering all questions in the application- honesty is key!
As stated above the factoring company will have an underwriter review your documents and if discrepancies are found the application process can be held up.

Getting you your money as quickly as possible is the goal for any factoring company. These tips can help you and the factoring company ensure the application processes is smooth and you have access to the funds when you need them whether it is to fund your payroll, pay for supplies, bid on a new job or pay vendors.

 

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We recently had a chance to speak with Kimberly, from a masonry contracting company in Arizona, who is utilizing CapitalPlus Equity’s construction factoring services.  Since many contractors might be unfamiliar with the benefits of construction factoring for contractors she wanted to share their experience.

Q: Please tell us about your business. 
A: My husband and I founded our custom masonry company in 1998.  We have been blessed to weather the adversity of the economy and complications of the construction industry.

Q: What affect has factoring had on your business?
A: CapitalPlus has really helped us maintain continuity with our cash flow. Like many masonry contractors we have customers who sometimes do not pay for 60-90 days and factoring has helped us with this.

Q: How do your customers feel about you using CapitalPlus as your factoring company?
A: The customers whose invoices we factor have never complained. I'm sure at times it helps them out as well with managing their outflow of funds.

Q: Would you recommend factoring with CapitalPlus Equity to other contractors?
A: I would recommend CapitalPlus to other contractors who are in need of generating continuous cash flow. The team is helpful and the funds are wired to your bank for easy availability usually the same day.

 

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Working Capital for Masonry Contractors

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There comes a time when every masonry contractor could use more working capital for their business for expenses like making payroll, buying supplies or taking on bigger or new jobs. It can be challenging to wait the 45, 60 or more days for customers to pay their invoices.  Not to mention the economic climate over the past few years has made it hard for you to get a bank line of credit. Fortunately, masonry contractors have another option, accounts receivable factoring. Factoring can provide relief to your business by giving you access to immediate working capital without your customer having to pay quicker than they normally would. Additionally, factoring allows masonry contractors to consistently meet their payroll, pay vendors timely, buy supplies and bid on more jobs they otherwise couldn't.  

The Four Easy Steps to Accounts Receivable Factoring
Accounts receivable factoring can provide your business with a continuous source of operating capital. Here is how it works:

  1. You send your invoice to your customer and a copy to the factoring company.
  2. You receive up to 80% of the invoice from the factoring company.
  3. The factoring company collects payment from your customer when the invoice is due.
  4. The factoring company pays you the balance of your invoice amount, less a fee.

Benefits of working with a factoring company

If you go to a bank for a loan they will consider whether your company is financially sound. Factoring companies don’t look at the size of your business, how long you have been in business or your creditworthiness. In fact, factoring companies look at the creditworthiness of your customers. If your business has a creditworthy commercial customer base with unpaid invoices you can benefit from factoring.

Additional benefits of accounts receivable factoring:

  • The business owner does not incur any debt as they are “selling” the receivable as long as their customer pays the invoice.
  • You are able to take advantage of early payment discounts from suppliers, as the factoring company will often pay your creditors right away.
  • You no longer need to offer early payment discounts because you are getting payment right away from the factoring company.
  • The factoring company can provide you credit information on your clients to better determine pricing on the project and the credit worthiness of your client.
  • You can concentrate on building your business and making money instead of wasting your time worrying about when you are going to get paid.

Accounts receivable factoring may not be the first option you thought of when thinking of a working capital solution for your business as a masonry contractor, but it can be the perfect solution to your cash flow challenges. There truly can be no downside. It can be just what you need to get the cash for your business to make payroll, buy supplies, pay vendors and grow your business.

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We recently had a chance to speak with Sharon, from a company in Wisconsin who provides underground marking services, who is utilizing CapitalPlus Equity’s construction factoring services.  Since many contractors might be unfamiliar with the benefits of construction factoring for contractors she wanted to share their experience.

Please tell us about your business. 
We have been in business for over 20 years and we provide locating and marking of underground facilities such as water, sewer, cable, etc. services for major corporate and government clients.

Prior to partnering with CapitalPlus Equity, as your factoring company, how long was it taking you to collect on invoices?
It was taking close to 30 days for our invoices to be paid.

What affect has factoring had on your business?
Receiving our payments in a timely manner has enabled us to pay our employees on a regular schedule and have cash on hand for other bills.

How do your customers feel about you using CapitalPlus as your factoring company?
It has not affected our customers in any way, their payments are simply directed to an alternate source.

Would you recommend factoring with CapitalPlus Equity to other contractors?
I would recommend it to any small business that is working on a very tight financial schedule and/or budget.

 

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