California Construction Factoring Client
For the month of May, we will focus on a new client who approached us regarding his California construction factoring needs. This subcontractor works with municipalities in the Southern California region and his firm handles various stages of electrical projects for public works buildings – from new construction to ongoing maintenance. While the monthly revenue varies based on contracts, the company generally averages about $150,000 per month in billings. However, our client has reached a point where he is encountering difficulty with growing the company from its current state.
California Construction Factoring to Cover Payroll
One problem our client faced with growth was the inability to increase his staff and simultaneously cover the additional payroll obligations. A majority of his revenue is based on progress billing where payment is not received for typically 30 days after invoicing. However, his employees need to be paid every two weeks. The consistent gap between collections and payroll was barely manageable at his current state. There was just no way to expand his business without some sort of working capital assistance. We were able to secure an invoice factoring facility for our client where he received payment within 24 hours of invoicing his customer for completed work. With our California construction factoring program, there was no longer any need to wait the 30+ days for his customers to pay.
Contractor Factoring to Pay Suppliers
As soon as our client began receivables factoring, he was able to negotiate more favorable pay terms with his suppliers. Before utilizing our California construction factoring program, he was typically paying his suppliers on net 60 terms at an additional cost. However, by selling his receivables and collecting payment immediately upon the completion of benchmarks, he was able to expedite payment to his suppliers. As a result, our client found more favorable payment terms with his suppliers, allowing him to keep more money in his pocket. Ultimately, invoice factoring has allowed him to expand his operations and bid on larger projects without worrying about payment delays, and has also helped to resolve his previous cash flow problems so he can focus on what is most important, growing his company.
Conclusion
Our client’s working capital needs are by no means unique. We work with many construction subcontractors and even general contractors who find construction factoring to be an invaluable asset to their business operations. The cash flow solutions we offer allow our clients to not only continue operating, but also successfully expand their companies without the need for restrictive bank loans. While some clients use the proceeds to cover payroll and reimburse suppliers, others use the funds to pay for equipment, rent/overhead, and other basic operating costs. If this sounds like something that may benefit your business, or even if you just have some questions regarding how it all works, feel free to contact us today and we’ll be happy to speak further about your financial needs and how we are able to help.