How Factoring Can Help Demolition Contractors with Cash Flow

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 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.

Benefits of Factoring to Demo Companies

If you go to a bank for a loan, they will consider whether your company is financially sound through all the invasive methods at their disposal. Being risk-averse, they only want to give out loans to the “safest” businesses. Factoring companies don’t look at the size of your business, how long you have been in business, or make their decision solely on your creditworthiness. Because factoring is not a loan but a purchase of your outstanding invoice(s), factoring companies are most concerned by the creditworthiness of the business that will be paying the invoice – your customer. If your business has a creditworthy commercial customer base with unpaid invoices you can benefit from factoring.

Benefits of Accounts Receivable Factoring to Smaller Demolition Businesses

• You, the demolition business owner, do 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.
• When the factoring company does their due diligence on your customers’ credit they are indirectly giving you free professional credit monitoring of your clients.
• Because factoring is so much faster than other forms of traditional lending you have time to concentrate on building your business and making money instead of wasting your time worrying about when you are going to get paid.

The Five 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 apply to become a client and are approved.
2. You send your invoice to your customer and a copy to the factoring company.
3. You receive up to 80% of the invoice from the factoring company.
4. The factoring company collects payment from your customer when the invoice is due.
5. The factoring company pays you the remaining ~20% balance of your invoice, less their fee.

Accounts receivable factoring may not be the first option you thought of when thinking of a working capital solution for your demolition business but in certain situations it can be the perfect solution to your cash flow challenges. If it a good fit, it truly can few downsides. 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.

Wondering if factoring works with your business? Give us a call at (865) 670-2345 or schedule a time for us to call you. Helping construction businesses like yours is what we do… everyday… for the past 35+ years.