Subcontractors are a group of professionals for whom invoice factoring may be an ideal solution to a long-standing problem. Many subcontractors are forced to pay for construction materials they need upfront, but the subcontractors themselves are not paid for 30 or 60 days after the completion of their work. Obviously, this creates a cash flow dilemma, and one way to solve it is through invoice factoring. Here is how invoice factoring could be an ideal solution for subcontractors who are in need of upfront cash in order to proceed with assigned work.

How Invoice Factoring Works

Any business which has either a number of invoices or a few large ones, has the option of selling those invoices to a factor, who would provide upfront cash in exchange for the invoices themselves. The amount of money that the business owner receives would generally be somewhere around 80% of the cash value of the invoice, and the remainder would be paid when the invoiced customer actually pays their bill. At that point, the factor would subtract their fee for the service, and the remainder of the invoice amount would be remitted to the business owner. This could be the perfect solution for subcontractors who need cash in hand immediately, but will not be paid for a month or two after the completion of work.

Factoring Benefits to Subcontractors

Without a doubt, the number one benefit to subcontractors is the easing up of cash flow, since they would no longer have to wait 60 days or longer to be paid. Once a subcontractor sets up a business relationship with a factor, the subcontractor can be paid for an invoice as soon as it has been issued to a customer. Even if it’s not the entire amount of the invoice itself, a substantial amount of money will be in the hands of the subcontractor, and that will be sufficient to purchase construction materials to proceed with the job. When doing this on a regular basis, a subcontractor can establish regular cash flow which can be relied upon, and that’s the kind of situation necessary for business growth.

Interested in Invoice Factoring? 

If so, please contact us at Sterling Capital Consulting where our financial specialists can work with you to get you set up for factoring. Then your cash flow problems will disappear, and your business will be on solid ground.