Factoring vs. Debt: How to Choose the Right Financing Option for Your Business

Financing
July 7, 2022

Receivables financing, also known as invoice factoring and supply chain financing, has made a significant comeback in recent years as businesses are now requiring alternative and more efficient capital options. Today receivables financing is being utilized by 50% of S&P 500 companies and has become a competitive financing option particularly for SME businesses that deal with a stronger credit client.

Constrafor’s Early Pay Program (EPP) has emerged as the construction industry leader for receivables financing – particularly for subcontractors. With the power of invoice factoring, EPP empowers subcontractors to unlock their most valuable asset – receivables.

Debt Vs. EPP

Traditionally, specialty contractors have relieve on options like debt financing, including bank loans or credit cards. While this can be quick, it’s often expensive and inflexible. Further, bank loans may often have low interest rates, but require large amounts of collateral or personal guarantees, making them very difficult to attain. However, EPP is not a loan, it does not count as debt, and it does not require any collateral.

  • DEBT: Not designed for the unique needs of the construction industry.
    EPP: EPP is the only construction-first financing option for subcontractors.
  • DEBT: Long and burdensome application process makes for slow payments.
    EPP: Apply in minutes and get paid within 48 hours.
  • DEBT: High interest rates and administration fees.
    EPP: Single, transparent upfront cost – no interest or hidden fees.
  • DEBT: A loan is a liability on your balance sheet
    EPP: EPP is not a loan and does not affect your balance sheet.
  • DEBT: Lines of credit come with costly utilization fees
    EPP: EPP is flexible – only use it when you need it.

Is EPP Right For Your Business?

By allowing subcontractors to get paid immediately, EPP can drastically improve cash flow and create more predictability around payment timing. Whether you need cash to pay your suppliers, grow your business, or pay down costly debt, Constrafor is ready to be your strategic and reliable financing partner.

EPP is made for contractors who want to strengthen their company’s cash flow. Here are a few examples of how EPP can help you achieve your goals:

  1.  If your business is looking to invest in growth…
    Use EPP as an alternate source of liquidity when looking to make large capital expenditures, equipment or inventory purchases, and even M&A activities.
  2. If your business wants to win more jobs…
    Use EPP to free up liquidity for larger, capital-intensive projects.
  3. If you wish you could reduce interest payments…
    Use EPP to recapitlize your business and pay off costly loans, without taking on more debt.
  4. If you want more control over your cash flow…
    Use EPP to reduce risk of late payment and gain predictability into payment timing.
  5. If your business needs cash for emergency expenditures…
    Use EPP to get instant, affordable cash so you can cover bills, payroll, or really anything that comes your way.

How to Get Started

Subcontractors no longer need to wait months for the general contractors to process and pay their invoices – Constrafor’s EPP will pay them today. If EPP sounds like the right fit for your construction business, it’s easy to get started.

  1. Create a free Constrafor account & navigate to the Early Pay request page
  2. Get your EPP estimate by entering the invoice amount in the calculator
  3. Start a new request and upload the approved invoice

Register Now

Want to Learn More?

Download the free e-book to learn all you need to know about invoice financing and Early Pay Program.