There comes a time when every sand and gravel contractor’s 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 them to wait 45, 60, or more days for customers to pay their invoices. And the economic climate over the past few years has made it nearly impossible to get a bank line of credit.

Fortunately, sand and gravel contractors have another option: accounts receivable factoring. This financial option can provide relief to your business by giving you access to immediate working capital without your customers having to pay quicker than they normally would. Additionally, factoring allows contractors like you to consistently meet your payroll, pay vendors timely, buy supplies, and bid on more jobs you otherwise couldn’t.

The Four Easy Steps of 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 rely on 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. So, if your business has a creditworthy commercial customer base with unpaid invoices you can benefit from factoring.

Additional Benefits of Accounts Receivable Factoring to Sand and Gravel Businesses:

  • The sand and gravel 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 a 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 sand and gravel construction business but it can be the perfect solution to your cash flow challenges. There truly can be no downside.

So, if you are a sand and gravel construction business and need help with cash flow to make payroll, buy supplies, pay vendors, and grow your business, let’s talk about how CapitalPlus can help you.

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