4 Reasons to Consider Invoice Factoring with Early Pay Program
One of the top assets of any trade contractor is receivables—those invoices for work completed—which unfortunately can take months to fund, leaving trade contractors with too many bills and not enough cash in the bank account to either pay the bills or chase after great opportunities.
Constrafor’s Early Pay Program (EPP) is an affordable option for subcontractors that leverages an owner or general contractors’ credit position to pay invoices faster, an advantage that goes well beyond money in the bank.
Here are the top four reasons to consider EPP:
Optimize Working Capital: Working capital is the lifeblood of most trade contractors. The more you have, the better your financial position to measure borrowing capacity, bid on future work and, if needed, strengthen your bonding program. Many trade contractors don’t look at their receivables as an asset—but that’s exactly what it is!When you complete work and send the invoice to your client, your client does not pay immediately (the average payment in construction takes more than 80 days). This means during that entire time, your money is sitting in the client’s account rather than in yours. Invoice factoring, like Constrafor’s EPP, uses unpaid invoices to provide trade contractors with immediate funds in exchange for a clear, defined upfront fee.
Reduced Dependence on GC: Since the trade contractor is paid through EPP, most of the risk for payment is transferred to Constrafor. The trade contractor doesn’t care if the general contractor takes another 120 days to clear the invoice, which lowers the financial risks as noted in the next point.
Clearer Risk Position: Invoice financing is not a liability on your balance sheet – take as much (or as little) as you want. You could even finance your entire turnover with it and speed up your cash flows without any risk on your business. Any time you need immediate cash , you can use EPP to raise the funds you need for the next job.
Reduce Financing Reliance: A predictable cash flow can minimize the need for traditionally inflexible financing options such as bank loans. If you borrow $500,000, you pay interest on the entire amount, whether you use it or not. With Constrafor’s EPP, you pay only for what you need. The interest payments are assessed per invoice, therefore you can increase or decrease amount used as needed.
Book a demo today to learn how Constrafor’s EPP can help your firm optimize working capital, reduce GC dependence and financing reliance while positioning your firm in the strongest position to compete for work.