The recently released 2010 Global Construction Survey by accounting firm KPMG highlighted the fact that the Australian construction sector performed well during the global financial crisis, in part due to the stimulus package from the Australian Government. Moreover, this sector is looking forward for new projects to come pouring and an increased backlog for the new two to four years.

What is good news for the construction sector is a mixed blessing for sub-contractor businesses in Australia based on the recent data presented by credit reporting firm Dun & Bradstreet, which highlighted that trade payment terms have increased. This data shows that firms have to wait for an average of 53 days in order to have their invoices or progress claims to be paid.

Therefore, it is not surprising that construction factoring – which has been used in the construction industry for years – is on the rise. Also with the current trends for property managers to focus on the new sustainable building and changes in building code standards, contractors are experiencing cash flow problems. Commercial financing has been in chaos for the past year, seeking construction funding for commercial property makes this situation rather evident.

Construction factoring can provide the much needed cash flow to pay suppliers and meet payroll. Why is this so? That is because factoring enables businesses to acquire funds using their present accounts receivables. Usually, it will take around a month to two months for construction subcontractors get paid for their pending invoices. Construction factoring advances funds against invoices and provides enough money to pay the bills when things are tight.

At present, the availability of commercial loans is rather tight. Together with other reasons, this has resulted to a shortage in funding for construction of new commercial properties. Even before commercial finance options became more restrictive during the past few years, construction financing was generally viewed as more “risky” by most lenders.

Looking at alternative providers of finance is essential in the current environment because as commercial lending is now dominated by the Major Australian Banks, there may be a bigger risk that they have over-concentrated in particular local areas in relation to their lending exposure. Smaller alternative providers of finance will generally not have the same issue and can consider commercial financing involving both existing properties and new construction. In some areas of Australia, the major banks have stopped virtually all new business financing as well as construction financing.

Considering the negative business borrowing atmosphere at present, it is critical for small business owners to check out an invoice factoring company that will explain to them the possibility of acquiring financing with the help of an alternative finance provider. Contractors and related small businesses alike can benefit from single invoice or spot factoring, stay in business and in most cases, grow when using smart financing options.

Call The Interface Financial Group (IFG) at 1.300 957 900 for more details on construction factoring.

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