Factoring in the context of construction refers to the process of selling accounts receivable to a third-party financial institution, known as a factor, in order to receive immediate cash flow. This can be especially beneficial for construction companies that may face delays in receiving payment from clients or struggle with cash flow issues. By factoring their invoices, construction companies can access the funds they need to cover expenses such as payroll, materials, and equipment rental, allowing them to continue operating smoothly without interruption.The factoring process typically involves the factor purchasing the construction company's invoices at a discounted rate, usually around 80-90% of the total value. The factor then collects payment directly from the client when the invoice is due, keeping the remaining percentage as their fee.
What is Factoring?
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