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Top Cash Flow Challenges for Contractors Solved | Merchant Funding

Where’s the cash? Where do I get cash? These questions are all too common in the construction industry. Even profitable construction companies can find themselves in a tight cash flow situation. For years, cash flow management has been a huge contributor to the number of insolvencies in the industry.

If you have been operating in the construction industry for even a short amount of time, you probably already know how much cash is required to start a significant project. To be successful, you have to know what the cash flow impact will be from that new project. How much investment will your company need to make before you see any positive cash flow from it? Companies that understand their cash flow and maintain the most control over it are the most likely to be in business down the road.

When it comes to cash flow problems, the following are the biggest factors for contractors:

  • Labor-intensive work
  • Payments made to suppliers or subcontractors before receiving a cash payment
  • Retainage
  • Cash purchases of fixed assets
  • Gaps between billing and collection of receivables (slow-paying customers)
  • Investments in joint ventures
  • Overstock of inventory
  • Unfavorable legal settlements

Strategies that Improve Cash Flow

It’s true that planning and monitoring are extremely important, but that’s just half the battle. It is also important to follow key cash flow strategies that will improve cash flow and boost cash reserves.

  • Schedule payments by the due date and be diligent about unpaid receivables.
  • Before bidding on a job, consider the cash flow impact of payment terms (negotiate appropriate changes before you sign).
  • Always avoid underbilling on projects.
  • Consider leasing rather than purchasing fixed assets.
  • Make sure delayed payments include increases for the cost of cash.
  • Consider depreciation methods for tax purposes that accelerate deductions and decrease tax liabilities.
  • Secure a financing option when you need quick cash.

Merchant Funding for Contractors

There are many advantages to choosing a merchant cash advance as a financing option for your construction company. In fact, many businesses choose a merchant cash advance over a business loan. What is a merchant cash advance? Why is this business loan alternative becoming one of the most popular forms of financing for contractors?

A merchant cash advance is not a short-term loan or a high interest rate advance. It is simply a sale. Your business sells its future sales at a discount to the provider in exchange for an advance of quick cash. Both parties involved agree to the number of sales being purchased and for what discounted cost. Consider the following comparison of a traditional small business loan and a cash advance:

Small Business Loan

  • Strict Credit Requirements
  • Long Wait Times for Funding
  • Complicated Contracts
  • Extensive Documentation

Merchant Cash Advance

  • Credit Scores Below 500 Approved
  • Receive your Funds 72 Hours from the Application
  • Simple, flexible programs
  • No tax returns or financials required

Biggest Benefits of a Merchant Cash Advance

Still unsure if merchant funding is right for your company? There are many benefits you should know about when it comes to a merchant cash advance. First, a cash advance is known for its high approval rate. Approval is based on business performance rather than personal credit, time in business or financials.

You will also enjoy fast funding and easy renewals. With First American Merchant, you can have money in your bank in as little as 72 hours. Once you have been approved, you can easily renew your advance when 50% of your balance has been paid down.

The simple “no hassle” payback nature of a merchant cash advance means there is no need to write a check every month. Your payments are automatically held from your credit card transactions. There is no fixed monthly payment.

In addition, collections are revenue based. With a merchant cash advance, the provider gets paid when you get paid. With FAM, our payment is a percentage of your daily sales, so if you have a slow month you pay back less. If you have a good month, you pay back more.

If you need funding, it may be time to consider the opportunities a merchant cash advance has to offer. Take on new projects, have the cash to cover payroll, and take advantage of new opportunities with the cash merchant funding provides.