Financing Construction Invoices

Not all factors will do construction receivables.  This is in part due to the inability to easily collect on invoices if a construction project does not go as planned.  Additionally, construction projects can be long term and factoring is traditionally focused on shorter dated invoices.  Regardless, there are niche factors that are willing to do these construction receivables!  Please contact s.grabish@finadvisr.com if you need to find a home for a client with construction receivables.

I have included a short primer on Construction Receivables below.

Sample List of Vendors Associated with a Construction Project

Painting Architect Roofing Flooring Concrete Groundskeeping Scaffolding Demolition Plumbing Fabrication Electricians 

Terms Unique to the Construction Space.

Like many industries, construction has its own billing and collection terms and nuances unique to it.   To be able to lend to this space, you must be familiar and versed in terms such as progress billings, retainage, milestones, bonded jobs, general contractor and subcontractors.

·        Progress billing:  invoices that are submitted for work completed to date on a lengthy project.

·        Retainage:  also called “retention,” is an amount of money “held back” from a contractor or subcontractor during the term of a construction project.

·        Milestones:  certain critical items during the Construction Period that must be completed within a certain period of time

·        Bonded job:   A construction bond is also called a construction surety bond or a contract bond. The project owner or investor, also known as the obligee, lists a contractual job that it wants done. To reduce the likelihood of a financial loss, the obligee requires that the contractors put up a bond

·        General contractor:  A general contractor is a party with the responsibility to oversee a construction project and who enters into the prime contract with the property owner. The general contractor is sometimes known as the direct contractor, and this is very important when it comes to getting paid

·        Sub-contractor:  A business entity that, pursuant to a contract with a person other than the owner or lessee of the real property, performs any part of a construction contractor's contract for an improvement to that property.