What if I told you I could save you enough money to hire up to 3 additional engineers for your next project with a factoring lender? It is achievable.
Here at Liquid Ally, I often see money left on the table by construction firms after taking on a large build and scaling up fast. The sudden growth leaves the controller or CFO scrambling to find the cash to cover increased operating costs, buy equipment, and ensure their crews are paid on time.
I know, I’ve been there. As a former CFO, I’ve been in the same position overseeing a rapid growth spurt in a large construction company that generated $80 MILLION of new business in one year.
Let me help you determine if your current factoring agreement is harming more than benefiting you. Or, better yet, talk to us before agreeing to a financing deal you are considering to see the savings and increased service and value we can bring to the table for you. Areas we frequently see as room for improvement in existing factoring agreements are fees, processing times, and the value provided by the factor.
The Biggest Loser – Unnecessary Fees
Time and time again, we see commercial construction firms that have scaled quickly and rushed into factoring agreements that are not to their best advantage. These agreements often include unnecessary costly additional fees such as:
- Application Fee
- Setup & Service Fees
- Deposit Fee
- Transfer Fee
- Cancellation Fees
- Origination Fees
- Hidden Fees (charging you interest on 100% of the invoice instead of only on the amount advanced)
Not to mention a much higher interest cost built into your factoring fee than what you should be paying.
At Liquid Ally, our vetted lenders do not charge useless fees that only decrease your cash flow and your profit further. Our lenders can frequently help our clients save as much as 30% when compared to their current contracts.
Lost Time – Avoid Delays in Funding
It’s not uncommon to have a factoring lender company boast of same day funding. They claim same-day funding but usually lag between receiving and advancing payment on invoices, sometimes up to 5 days.
As part of our services, we assist our construction clients with verifying their milestone invoices in the field. Before they’re submitted to the factoring company. Pre-verifying invoices help reduce processing time. We also work with factoring companies who understand your industry, reducing valuable time explaining industry-specifics, like milestone billing and job-costing.
We are a facilitator for both our clients and our lenders. Our ongoing relationship with our clients enables us to assist with the initial application process, documentation requests, and submissions. This reduces the chances of rejected invoices due to easily avoided reasons, like missing signatures. Getting you the cash you need faster and with less hassle.
Comparative Value
It is vital to analyze not only the direct costs associated with your contract but the indirect costs as well. In other words, what benefits are you receiving or missing out on?
Some factoring lender agreements are structured solely to fund your invoices, collect their fees, and be done. Thank you very much.
However, full-service agreements may provide some nice complimentary perks to save your business valuable time and money. These perks are typically in the form of free credit checks on your clients, support or managing accounts receivable, and even collecting outstanding invoices.
The Long Game
Financing your growth should help move you into maintaining a positive and increasing cash flow. Part of the benefit of working with factoring is keeping debt off your books, so your business isn’t overleveraged when your growth enters a stage of stability and predictability.
Factoring allows your finance and accounting teams to move from panic mode into planning mode, producing a stable balance sheet. This stability will enable you to obtain better lending rates in the future with a more traditional facility such as an ABL. Securing cash now and generating sound financial statements prepares your business to re-invest in things like better equipment, larger crews (e.g. a few more engineers) and increasing your business volume.
Contact me today to schedule a Complimentary Liquidity Assessment to determine how I can assist you. Or download our guide: 5 Things You Need to Know Before Looking for a Lender.