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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