Contractors Use Construction Factoring to Provide Businesses with Disaster Aid

Construction factoring has been of assistance in the past during many natural disasters like the recent earthquake and Tsunami in Japan. Immediate funding for disasters can include outsourcing crucial business functions during the aftermath of the crisis, and costs to accommodate plans for relocation, then possibly construction costs during future rebuilding efforts.

Many countries experience a variety of natural disasters – there are hurricanes on the Pacific, Atlantic, and Gulf of Mexico coasts, volcanic eruptions, tornadoes in the plains, and floods throughout the Midwest, and of course, earthquakes on the coast of California. In the United States alone, there is about $1 billion in losses weekly due to natural disasters. Although Congress creates a reserve for emergencies and natural disasters every year, but this does not always cover the private funds necessary for businesses to get back up and running immediately or to relocate.

Preparedness for disasters is supposed to include all of the activities carried out prior to the advance notice of a catastrophe in order to facilitate the use of available resources, relief, and rehabilitation in the best possible fashion. A tactic known as disaster mitigation is basically an ongoing effort to lessen the impact disasters have on people and property. Fewer people and communities would be affected by natural disasters if they used disaster mitigation. One such strategy is construction factoring.

However factoring companies are in the position to offer support to small businesses suffering from the consequences of natural disasters. Often times construction factoring can be an essential financial resource to benefit the many construction contracts that are underpinning rebuilding efforts for the aftermath of a natural disaster.

Here is how a contractor can benefit from construction factoring. As an example — a construction company could factor current outstanding invoices and would not have to wait for payment before starting construction on a new project. Sub-contractors or construction firms can realize quick turnaround (often within 24 hours) on accounts receivables that are due, enabling them to buy needed supplies, staff up quickly and make the necessary travel arrangements to head for a community that has experienced a natural disaster.  It is a win-win situation for everyone concerned.

Few companies in the United States offer construction factoring. And those that do assure customers about just how easy it is to get the cash they need without a lengthy and aggravating lending process. With no minimums, maximums, long-term commitments or lengthy application process, invoice factoring offers speedy source of cash.

Factoring companies do not always expect to buy 100 percent of a company’s receivables, and there are no minimum or maximum sales volume requirements. The company’s professional rates are competitive because each client’s circumstances vary, and this may have an impact on the fees charged. The program allows choices of invoices to be factored, enabling customers to retain most of their money, to guarantee adequate cash flow while spending the minimum fees.

First review any of your outstanding accounts receivables – as you may know, many companies don’t get paid right away after they have delivered their products or services, and this alone can  negatively impact their cash flow situation, which makes it harder for the business to purchase new supplies and produce new orders. Invoice factoring can benefit a business that doesn’t get paid for 30, 60 or 90 days. Unlike bank loans or credit cards, there are no minimums, no maximums, no long-term commitments and no lengthy application processes when using most legitimate factoring companies.

A factoring company will usually advance up to 90 percent of an invoice total, and they can often provide funding in as little as 24 hours. Keep in mind, however, construction factoring is not a loan – it’s the purchase of receivables or financial assets. Factoring is different from traditional bank loans because bank loans typically involve two parties, while factoring involves three parties. A bank bases its decisions on a company’s credit worthiness whereas factoring companies usually base their decision on the value of the accounts receivables.

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