Payroll is one of the biggest challenges for construction subcontractors. It is often hard to pay employees and suppliers. The reason is getting paid 30 to 60 days after they submit their invoices.
It isn't impossible to wait 60 days if the subcontractor has a large cash reserve. As payroll has responsibilities which will never end this is especially true.
 If you think getting a business loan or line of credit will help much, you are mistaken. Banks do not lend money to subcontractors. Moreover, they usually require at least 2 years worth of audited financial statements showing a benefit. Besides, their loans can take weeks or months to get setup.
But there is a choice. It can eliminate the payment wait and get invoices paid in a little as 2 days. Subcontractors can easily pay employees and suppliers on time with getting paid. It enables them to grow their businesses. This is a construction factoring. You can finance and grow your construction business with factoring receivables. The last is the easiest way.
The main steps in factoring:
1. What you do is sending a bill to the GC or client for a progress segment or completed job.
2. The factoring company advances you up to 75% of the submitted invoice. Then you get immediate use of the money. The remaining 25% is kept as a reserve.
3. If your client pays the invoice, the 25% reserve will rebated to you, less a small fee.
Doing business with reputable GC's or commercial clients and having a well-run business are the biggest requirements to qualify for factoring financing. Generally, a factoring financing line can be set up in as little as 5 days.
With accounts receivable factoring you can have a great tool to finance your growing construction business.
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