You’re ready to start your next construction project. Then you realize the money you need is tied up in accounts receivable. Construction invoice factoring gives you the working capital needed for materials and labor. Your construction receivables are an asset that can be leveraged.

Owners of construction companies are frequently hampered by the lack of working capital, particularly when they’re involved in multiple projects. The dilemma is magnified when their funds are tied up in construction receivables. In many cases, materials must be purchased without the benefit of credit and employees must be paid weekly. This can cause a major cash crunch, but construction invoice factoring is an excellent money management solution to the problem.

With factoring, cash is advanced to the client upon submission of an invoice. The services being billed must be approved and acceptable to the client’s customer. With construction factoring, there must be a “milestone” for each billing. In other words, a certain part of the contract must be performed and an actual invoice generated, as opposed to a percentage of the entire contract completed.

The advance for construction factoring is typically between 65% and 75%, depending upon the situation, with the remainder remitted to the construction company upon collection of the invoice, less the factoring fee. The advance can be advantageous in a variety of ways, including the ability to obtain materials purchase discounts and to be able to negotiate optimal pricing. The influx of working capital from factoring construction receivables fuels the company’s growth.

Factoring provides cash flow to:

Cover payroll and other expenses

Take on new jobs

Take advantage of volume discounts on material purchases

Increase your company’s growth

One frequent question is,” Can invoice factoring be utilized if the service provided spans a long time frame?” The answer is yes, but the way the company bills the client is critical. When you initially set up the agreement with the customer, you should specify the exact work to be performed as it relates to billing. In other words, both parties should agree that an invoice can be generated upon a certain level of performance or milestone. The factoring company will be able to advance funds based upon that invoice even though the entire job isn’t completed.

Contrast this scenario to progress billings, an arrangement in which the customer advances money for the job as a whole. The Factor (lender) is hesitant to advance funds to the client with progress billings, since the company getting billed may become unhappy along the way and stop making payments. With milestones, on the other hand, that is not a problem.

Smart money management strategies I use with my clients include looking at factoring as an alternative for funding projects. Construction companies that need working capital owe it to themselves to investigate factoring as an option.

Factoring is just one of the many money management strategies that I use to help my clients. Here is a recent testimonial from one of my construction company clients:

“Two years ago my construction company was close to bankruptcy with only $30 in our bank account and no way to pay bills.

Using the Money Management Solutions program we are doing so well now. With the power of this system and the financial stability it has helped us create, we now have $130,000 in reserves and always have $250,000 or more in our bank operating account.” K. A.

For information on a reputable and ethical factoring resource for your construction receivables or information about the Money Management Solutions program, ask Sandra by sending an email to Sandra@MoneyMgmtSolutions.com

Are you a dental professional or healthcare provider in need of working capital? The simple solution could be invoice factoring.

Until recently, individual doctors, dentists and physician groups could easily go to their local bank and get all the working capital they needed.  But, while banks still loan money for that purpose, getting a loan or line of credit can be an uphill battle.

The ‘credit crunch’ has caused a major tightening in underwriting parameters at banks nationwide.  banks typically require a minimum credit score of 685, the practice must have a track record of profitability, and start-ups are excluded. Businesses who would have easily qualified for a line of credit six months ago are getting turned down.

The main problems with a bank loan are: it creates debt on which you pay long term interest at high rates, a low credit score locks you out of qualifying, and it often requires a personal guarantee and additional collateral.

Factoring is an excellent means of acquiring needed cash flow.  Medical accounts receivable factoring is the business of buying third-party accounts receivable at a discount so as to make a profit from collecting them. There are very positive differences between bank loans and invoice factoring.

• Invoice factoring is not a loan. It is an off-balance sheet transaction so the factoring fees are a deductible expense.
• Personal guarantees are not normally required, as they are for a bank loan.
• Funds can be received within a week of applying, provided all documents are received in good order.
• With invoice factoring, additional collateral is not required to be pledged.
• Funding is only limited by the company’s pool of accounts receivable, as opposed to bank financing, which usually loans a maximum amount.
• The credit of the business or its owners is not of major importance to the factoring company.

With invoice factoring, funding is limited only by the amount of third party receivables the professional has on its books.

Third party receivables are those amounts due from insurance companies like Blue Cross and government programs such as Medicare and Medicaid.  With medical invoice factoring, the healthcare provider submits a batch of invoices to the factoring company and receives an advance at a rate that is determined by the contract.

The advance rate is typically 75% – 85% of the estimated net collectible value of the invoices.  The remaining amount (the reserve) is remitted back to the provider upon collection, less the factoring fee.

Are you a healthcare provider or dental professional in need of an infusion of working capital? Referring the best resources for medical invoice factoring is just one of the many money management strategies I provide to my clients to insure they achieve their financial goals and build wealth for their long-term financial freedom.

Another great tool I recommend reading is Dr. Brian Dawson’s new book Breaking The Profit Barrier – The Healthcare Practitioner’s Guide, so check out this book!