Construction factoring is a type of business funding that allows businesses to retrieve a portion of their outstanding invoices, for a cost. A construction factoring company purchases your outstanding invoices for a discount. Then, they are responsible for collecting from the customer. The rates attached determine the discount they buy your invoices at. This is a convenient but costly solution for contractors and subcontractors.
However, this solution is quite difficult to find and, when you do, it’s even harder to qualify for. That being said, you do still have options for construction factoring. Let’s take a closer look at construction factoring below.
Advantages vs. Disadvantages of Construction Factoring
There are some advantages and disadvantages of construction factoring that you need to be aware of if you are considering this as an option for your company.
Advantages of Construction Factoring
If you are interested in construction factoring as a solution to your financial predicament. You should know about the advantages of this option. These are:
You can access a portion of the invoice value earlier
You don’t have to worry about collecting from the customer yourself
Disadvantages of Construction Factoring
On the other hand, construction factoring also has some disadvantages as well. They are:
Rates are typically high
The construction factoring company will contact your customers
Conclusion
If you are a contractor or subcontractor in need of funds, you might want to consider construction factoring as an option. However, you must take the time to understand this option fully before committing to it. There are advantages and disadvantages to this financing solution.
If you believe that construction factoring may be an option for you, contact us today at Achieve Capital Advisors. We would love to help you navigate through the complicated world of applying for construction factoring.