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What is the Difference Between an MCA and a Factor?

September 26, 2016 Uncategorized 0 Comments

Owner of Construction Finance, John Sawyer, discusses the difference between a Merchant Cash Advance companies and Factoring Companies.  In our

Owner of Construction Finance, John Sawyer, discusses the difference between a Merchant Cash Advance companies and Factoring Companies.  In our earlier video we were talking about a Construction Finance client that was in a cash bind who needed a quick $100,000 to take on a big project that was above and beyond his financial scope.  Watch the video below to learn the difference between an MCA and a Factor.

I hope you can relate to me.  You are getting these phone calls saying, “You are pre approved for $100,000 in working capital. We don’t check credit, all we do it look at your bank statements.  Call now, don’t you want to grow?”  You may even be receiving them by robo phone calls.  There are hundreds of these companies trying to push money onto small businesses to get a good rate of return.  It sounds great, “sign up now and we’ll add $10,000, $50,000 or $100,000 to your bank account tomorrow. Then we will begin to ACH payments out of your account.”  There may be situations where that is your only option.  But at Construction Finance, we offer a different option for the construction industry and other service related industries.

Let me work you through the math.  A person is needing extra capital for payroll, materials, labor, insurance premiums or whatever the need may be.  Here is a tale of two fundings, they are totally different.

A merchant cash advance company may call you and tell you that you are pre qualified for a $10,000 advance added to your account today.  Including a $30 wire fee, $150 documentation fee and possibly many more fees.  But for the sake of the math, let’s say they put in a total $10,000 into your account.  This is the story of one of our clients.  He had taken the $10,000 unfortunately.  The next day he begins having $100 ACH debited from his account daily for 130 days.  So, you can do the math, he did get a quick fix today but in the end he paid $13,000 back BUT he paid an extra $3,000 in FEES!   There may be cases in your business life where this is the only option but we want everyone to know that we offer an alternative method of funding.  We can buy your receivables.  A factor is just someone who buys an invoice for a small discount.  Our discounts can be as low as 1.5%, 3% and possibly 4.5%.

So if Construction Finance had advanced $10,000 on a particular invoice, our rates would be approximately:

1.5% if that invoice paid in 15 days= $150

3.0% if that invoice paid in 30 days = $300

4.5% if that invoice paid in 45 day = $450

6.0% if that invoice paid in 60 days = $600

So, your eyes aren’t deceiving you.  There really is a “0” difference.  MCA = $3000  VS   Construction Finance Factoring = $300

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We are literally 1/10th the price of a quick cash merchant cash advance.  If you have a MCA offer and are unsure about the details, call us and we will go over the contract and look for any hidden details that you may be missing.

Construction Finance 870-277-0658

 

 

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Construction Working Capital Struggles

September 25, 2016 Uncategorized 0 Comments

In the previous post, John Sawyer, owner of Construction Finance, shared about growing as a contractor or small business and experiencing

In the previous post, John Sawyer, owner of Construction Finance, shared about growing as a contractor or small business and experiencing the ‘best of times and the worst of times.’  Navigating how to keep the funding in place to keep the employees paid, vendors paid, subcontractors and suppliers paid.  He talked about banks, working capital loans and selling invoices.  Listen as he shares more detailed information about selling invoices.

Banks are very important.  Use your bank for low interest, long term loans, to pay for real capital.  Use banks to pay for buildings, a backhoe, trackhoe, crane or horizontal digging equipment.  Any equipment that you can buy with any low interest bank loan.

What happens when you get that equipment bought and your crew has grown?  Sometimes that bank line of credit is maxed out.

For instance, I had a client this week, a smart, smart client.  He has a nice line of credit at the bank, about $150,000.  However, he bills about $250,000 a month worth of business.  He can cash flow that amount but overnight he was awarded another $100,000 contract on top of his normal $250,000 monthly business.  He said, “I can’t go back to the bank and ask for an increase in a line of credit. This is a 45 day long job and they’ll never get it approved by then.”

This is a situation where Construction Finance and invoice factoring is the answer.  He needed to factor his accounts receivable and Construction Finance can purchase invoices in the construction realm for 1.5%, 2%, 3% and sometimes 4%, depending on the project.  So he was able to take that project and grow his gross and net revenues by selling his invoices and continue to keep his bank relationship strong.

While most contractors panic when they have that situation.  $350,000 worth of cash flow problems.  But as you can see, he doesn’t have $350,000 worth of cash flow problems, he only has $100,000 worth of cash flow problems.  Construction Finance was able to purchase those invoices for that additional $100,000 worth of work that he does.  We can purchase them at a rate of 1.5%, 2%, 3% or possible 4% depending on the particulars of the job.

So look at your projects, and before you panic with your line of credit or your working capital you’re using now, look at the amount that’s really putting you over your comfort level and consider selling those invoices to us at Construction Finance.  Nothing will change.  Your contracts don’t change, we don’t interfere with your relationship with your general contractor or your customer.  We advance money on that invoice after work is completed and then we are the ones who wait to get paid from your customer.

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Construction Business Best of Times and Worst of Times

September 24, 2016 Uncategorized 0 Comments

John Sawyer, owner of Construction Finance, begins the “What is Construction Factoring? Tutorial Series” with a little background. My dad

John Sawyer, owner of Construction Finance, begins the “What is Construction Factoring? Tutorial Series” with a little background.

My dad was an english teacher when I was growing up and made  me read books.  My kids today don’t read too many books unless they have to for school.  They are too busy texting, instagraming, snapchatting, facebook and devouring so much online information.  But my dad made me read books.  Charles Dickens novel, “The Tale of Two Cities” starts out with, “It’s the best of times and it was the worst of times.  I didn’t know what that meant when I read that but since I entered the construction business in about 1995, I learned what it meant.  In about the year 2000, it was the best of times for my little construction company.  I had about 15 full time carpenters, we had work, business was booming.  But at the same time, it was the worst of times.  I did not have the right cash flow for the tools, to keep all my employees paid, to keep all my vendors and suppliers paid on time.  It was the worst of times when it came to cash flow and growing too quickly.

So what are your options?  You can go to the bank.  Often times that takes many weeks, perfect credit, and lots of approvals.  You can say, “yes” to these hundred people who call you every day telling you that,  “you’ve been pre approved for $100,000 of working capital.  Sign up now and all you have to do is pay us back $1,000 a day forever.”  But, there is another option, you can sell your invoices to a construction factor, such as Construction Finance, for a much more affordable rate than that $100,000 working capital that they offer you over the phone and force you to pay back $1,000 a day forever.

In my next video, I’ll go over the rates and how it works exactly to make it through those ‘worst of times and best of times’.

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What is Construction Factoring?

September 23, 2016 Uncategorized 0 Comments

Accounts receivable factoring, invoice factoring, factoring receivables and factoring are all the same.  Construction factoring is the same as well.

Accounts receivable factoring, invoice factoring, factoring receivables and factoring are all the same.  Construction factoring is the same as well.  However, in construction factoring there are a few extra layers of paperwork that may make things a bit confusing if you’ve never factored a construction invoice.

John Sawyer, owner of Construction Finance, has put together a video tutorial series to help you understand the steps of construction invoice factoring.  You will also realize that having a factoring company like Construction Finance will give you an extra layer of protection.  Never leave another job site without being paid the entirety of your invoice.

Over the next few days, we will post each new video in the What is Construction Factoring series.  If you just can’t wait to watch them all, check out our Youtube channel playlist and watch them all.

Click here to start the series with Video 1:

“What is Construction Factoring?” Tutorial Series“What is Construction Factoring?” Tutorial Series

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Invoice Factoring for Sand and Gravel Contractors

September 22, 2016 Uncategorized 0 Comments

A growing company means there will come a time when every sand and gravel contractors business will need more working

A growing company means there will come a time when every sand and gravel contractors business will need more working capital.  Cash for things like making payroll, buying supplies or taking on bigger or new jobs. It can be challenging for sand and gravel contractors to wait the 45, 60 or more days for customers to pay their invoices.  The economic climate over the last few years has made it hard for companies to get a bank line of credit. Finally, sand and gravel contractors have another option, accounts receivable factoring. Invoice Factoring can provide relief to your sand and gravel business by giving access to immediate working capital without your customers having to pay quicker than they normally would.

The Four Easy Steps to Accounts Receivable Factoring
Accounts receivable factoring can provide your business with a continuous source of operating capital, here is how construction factoring works at Construction Finance:

Benefits of working with a factoring company


If you go to a bank for a loan they will consider whether your company is financially sound.  Factoring companies don’t look at the size of your business, how long you have been in business or your creditworthiness. In fact, factoring companies look at the creditworthiness of your customers. If your business has a creditworthy commercial customer base with unpaid invoices you can benefit from factoring.

Additional benefits of accounts receivable factoring:

  • The sand and gravel construction business owner does not incur any debt as they are “selling” the receivable as long as their customer pays the invoice.
  • You can to take advantage of early payment discounts from suppliers, as the factoring company will often pay your creditors right away.
  • You no longer need to offer early payment discounts because you are getting payment right away from the factoring company.
  • The factoring company will do due diligence on your customers, ensuring that they are credit worthy, so in turn giving you often free professional credit monitoring of your clients.
  • You can concentrate on growing your business instead of wasting your time worrying about when you are going to get paid.

Construction Invoice factoring may not be the first option you thought of when thinking of a cash solution for your sand and gravel construction business, but it can be the perfect solution to your working capital flow challenges.  It can be just what you need to get the money for your sand and gravel construction business to make payroll, buy supplies, pay vendors and grow your business.

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