Construction Factoring Supports Industry During Recovery

According to recent press statements, 2010 has been viewed as the first year of ‘the road to recovery’ for the construction industry.

Despite headline upsets along the way such as the UK Schools Rebuild project being shelved, construction trade finance being scarse and the collapse of Connaught and more recently Rok being placed into administration, the overall trend is one of quietly growing stability.

The number of construction insolvencies in the third quarter of 2010 fell 11.2% compared to the same period a year ago and the figures also show a 2% drop on the previous quarter and a 21% decrease over the last seven quarters.

Despite concerns over available industry wide workload and the tightening of margins, the construction industry in the UK appears to be holding up fairly well. As with any industry, cash flow will become even more important over the coming months as contracts being worked on next year will have been secured based on 2009 and 2010 prices. As such, buying margins will become more difficult to achieve.

Yet despite the challenging times and end property values under continued downward pressure, both in the commercial and residential sectors, the levels of activity are on the increase and construction factoring is playing a part in keeping the wheels turning.

Construction finance is a specialised product and Factoring Finance has access to a UK wide independent broker network able with sector specialist able to source the best invoice finance and construction finance facility for its clients. The factors that ultimately provide the finance have their own Quantity Surveyors whom are usually specialists in both the construction industry and factoring. As such, they are able to structure the facility to meet your cash flow requirements and they can account for issues such as applications for payments, liquidated damages, JCT contracts, retentions and stage payments.

In addition to providing the construction factoring finance, the factoring company undertakes the task of collecting outstanding unpaid debtor sales invoices, which saves the construction firm time and money. In managing the sales ledger the factoring provider will send out debtor statements, chaser letters and contact debtors by telephone to secure payment of the invoices on time.

Factoring companies are experts in chasing invoices and do so with professionalism and respect for their clients’ customer service levels and brand and aside from taking care of the admin function, are more adept of avoiding late payment problems, further improving your cash flow.

The construction sector has also seen a trend towards consolidation of development and construction firms, with the focus of debt reduction risk management and cost control and in the challenging climate of late, many construction firms have survived only through the use of construction factoring.

Through the use of factoring, construction companies no longer have to wait for payment before starting on the next phase of a project, or to begin construction on a new project. Factoring also provides subcontractors with a quick turnaround on their accounts receivable, due for completed stages of a construction project, which in turn speeds up cash flow and improves the subcontractors’ ability to start immediately on the next phase of construction, as opposed to waiting 30, 60 or 90 days.

Whether you are a subcontractor, small business or major industry construction firm Factoring Finance can find the right solution for your needs and our independence ensures we find the best fit for your business, not the invoice finance provider’s. If you want to discuss any of the issues raised in this blog item, or other invoice finance services such as invoice discounting,  bridging loans or other non invoice small business finance products pick up the phone or leave a message via the site and we’ll call you when convenient for you.

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