Norman Ramsay talks about some of the finance related issues firms in the construction industry often come across.
Last week I posted a discussion on the Construction Professionals Forum on LinkedIn entitled: Reasons why construction firms fail | UK. It surprised me how many passionate comments I received from construction industry professionals worldwide, talking about what the top issues are for construction firms to get right in order to survive.
I wanted to take this opportunity to jump on some of the comments which stood out to me as they are in my field. Although I cannot pretend to be an expert in advising construction firms on how to run their entire business, I can offer my experience of dealing with financing construction firms.
Common problems with construction firm finance
I have taken a couple of the comments which I think I have a solution to (please note that both of the contributors below said more than what I have chosen to quote, but these are the key comments I can hopefully help with).
Charles Edward from the UK spoke about how “Many firms being expected to provide services on credit where little in the way of background checks are done against those they are being asked to offer credit to”. Whilst Jon Lunderberg from the USA said – “[A] Lack of Equipment Cost Control”, “Poor Billing Procedures”, “Contract Size” and “Scope of Work” are some of the key reasons (amongst others) for construction firms failing to survive and thrive.
With cash flow management and credit terms being the common reasons for construction firms failing to stay on top of their cash flow, a possible solution called application factoring could help out.
Factoring applications for payment
It is a common misconception that invoice finance lenders will not fund against applications for payment in the construction industry. There are lenders out there who are willing to advance cash provided on credit to the customers of construction firms, whilst also providing support in collecting payment and ensuring everything runs smoothly in the back end, if required.
This could single-handedly help a construction firm overcome their problems with cash flow. The customers demanding credit terms are happy whilst the firm still receive the cash on day one of the application being created. Projects demanding a large investment in cash, whether for wages, materials or equipment, are also easier to afford as the cash is advanced from the future payment expected to be received.
Find lenders who can factor applications for construction firms
If you are a construction firm owner/decision maker and want to find out more how application factoring works, please fill in the short form below and one of the consultants will get back to you for a no obligation chat. All advice is FREE of charge and we can put a good word in for you with the application factoring lenders if you qualify so you receive the most competitive quotes possible.