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The financier (factor) purchases construction invoices and advances a percentage-often within 24 hours-then collects the funds and forwards the remainder of the invoice to you, less a factoring fee. This flexibility comes at a premium but often makes sense if you have one client that is particularly slow or if a consistent flow of capital is not needed Construction FactoringĬonstruction finance offers sub-contractors and general contractors access to quick cash from your invoices so you can get the funds you need to start your next project. Unlike traditional factoring, where the company turns over all invoices, spot factoring is available on an as-needed or one-time basis. Typically, businesses will want to spot factor when they don’t need a steady flow of cash or have varying gross margins where it does not make sense to factor. Small business owners opt for this form of factoring when they do not want to factor all of their invoices. It deducts a small fee, based on the size and age of each invoice. The factor pays you the remainder of what you’re owed once your client pays the factor, usually 30 to 45 days later. The finance provider, known as the factor purchases all of your accounts receivables and advances you 70% to 90% of the total amount within 24 to 48 hours.
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You are able to create an immediate influx of cash based on the invoices already on your books. Traditional factoring is an ideal solution for companies that need extra cash flow to purchase inventory, cover payroll or invest in marketing.