Keeping cash coming into your business can be a bit like building a house without a blueprint—challenging and fraught with unexpected hurdles. Construction factoring companies provide a helpful financial tool that can give your company the cash it needs to keep your projects on track.
How I Picked the Best Factoring Companies:
- Industry Reputation: I started by looking at companies with solid track records in the construction sector. Longevity and positive client testimonials were the key indicators of reliability.
- Financial Terms: I looked at advance rates, discount rates, and whether companies offered recourse or non-recourse options.
- Speed and Efficiency: Time is money in construction, so I prioritized companies known for quick funding processes—ideally within 24 hours.
- Customer Service: A dedicated account manager or personalized service can make a world of difference, so I considered how each company supports its clients.
- Accessibility: Finally, I looked at revenue requirements to ensure these factoring companies cater to a range of contractors—from small subcontractors to established construction firms.
By focusing on these criteria, I was able to identify factoring companies that not only offer competitive terms but also understand the specific challenges faced by those in the construction industry.
Best Construction Factoring Companies
| Factoring Company | Advance Rates | Recourse/Non-Recourse | Revenue Requirements |
|---|---|---|---|
| 1st Commercial Credit | Up to 95% | Both | $100,000 monthly |
| Scale Funding | Up to 90% | Recourse | $50,000 monthly |
| Riviera Finance | 80% to 95% | Non-Recourse | No minimum |
| Factor Funding Co. | 80% to 95% | Both | No strict minimum |
| CapitalPlus | Up to 80% | Recourse | No strict minimum |
| Capstone | Up to 85% | Both | $100,000 annually |
Let’s delve deeper into some of the best construction factoring companies, giving you a comprehensive look at what they offer.
1. 1st Commercial Credit
Best for Established Contractors
1st Commercial Credit is known for its straightforward approach and quick turnaround times, making it an attractive option for construction companies that need fast access to working capital. They specialize in providing financing solutions without the usual red tape associated with traditional lenders.
1st Commercial Credit Overview
- Advance Rates: Up to 95%, one of the highest in the industry, giving you maximum liquidity.
- Discount Rate: Typically ranges from 1% to 2%, offering very competitive pricing.
- Recourse or Non-Recourse: Offers both options; however, recourse is more common due to its cost-effectiveness.
- Speed of Funding: Once approved, funds can be available within 24 hours—ideal for urgent cash flow needs.
- Revenue Requirement: One year in business and $100,000 monthly revenue from multiple clients.
Why Choose 1st Commercial Credit?
1st Commercial Credit’s high advance rates and low discount rates provide excellent value for construction firms looking to maximize their cash flow. Their ability to offer both recourse and non-recourse options allows businesses to choose what best fits their risk management strategy.
With minimal paperwork and fast processing times, they help keep your projects moving without financial interruptions.
2. Scale Funding
Best for Utility Contractors
Scale Funding, formerly known as TCI Business Capital, has been a stalwart in the factoring industry since 1994, earning its stripes by specializing in industries that often face delayed payments, like construction.
Their expertise is particularly valuable for utility and pipeline contractors, where payment cycles can stretch out longer than anticipated.
Scale Funding Overview
- Advance Rates: Scale Funding typically offers advance rates up to 90%.
- Discount Rate: Their discount rates usually range from 1% to 4%, depending on the volume and nature of your invoices.
- Recourse or Non-Recourse: They primarily offer recourse factoring, which means you’re responsible if the client doesn’t pay.
- Speed of Funding: Once approved, funding can be as quick as 24 hours.
- Revenue Requirement: For businesses with monthly revenues of $50,000 or more
Why Choose Scale Funding?
With their dedicated account managers and tailored solutions, Scale Funding ensures you have someone who understands the intricacies of your business. This personal touch is invaluable when you need to get funding quickly.
3. Riviera Finance
Best for Commercial Construction
Riviera Finance has been around since 1969 and has built a reputation for reliability and transparency. They’re known for their full-service approach, handling everything from credit checks to collections so you can focus on what you do best—building.
Riviera Finance Overview
- Advance Rates: Typically between 80% and 95%.
- Discount Rate: Usually ranges from 2% to 5%.
- Recourse or Non-Recourse: Riviera offers true non-recourse factoring for added security against bad debt.
- Speed of Funding: Initial setup might take a few days, but subsequent funding is generally within 24 hours.
- Revenue Requirement: No minimum revenue requirement makes them accessible for smaller firms.
Why Choose Riviera Finance?
Riviera’s strong national presence means they have local offices across many states, providing regional expertise alongside their national resources. Their true non-recourse factoring agreement offers additional peace of mind against default.
4. Factor Funding Co.
Best for General Contractors
Factor Funding Co., based in Houston, Texas, specializes in helping small to mid-sized businesses manage cash flow challenges. They offer financing solutions tailored specifically for industries like construction that deal with fluctuating income streams due to project-based work.
Factor Funding Co. Overview
- Advance Rates: Offers advances ranging from 80% to as high as 95%.
- Discount Rate: Generally varies between 1% and 4%, contingent upon transaction volume and risk assessment.
- Recourse or Non-Recourse: Both options are available; however non-recourse is preferred by clients seeking additional protection against unpaid invoices.
- Speed of Funding: Once all paperwork is finalized, funds are typically disbursed within one business day.
- Revenue Requirement: No strict minimums, making them an attractive option even if you’re just starting out.
Why Choose Factor Funding Co?
Factor Funding Co.’s commitment towards personalized service ensures each client receives attention suited uniquely towards their operational needs. Whether it’s rapid response times during critical phases or flexible terms adapting seamlessly over time, they’ve got it covered.
5. CapitalPlus
Best for Specialty Contractors
CapitalPlus stands out in the construction factoring landscape by offering a suite of financial services tailored specifically to the needs of specialty contractors and subcontractors.
Founded in 1998 and carrying a deep understanding of the construction industry’s complexities, they provide not just factoring but also back-office support, helping businesses manage everything from lien rights to project documentation.
CapitalPlus Overview
- Advance Rates: Typically up to 80%, providing a substantial portion of your invoice value upfront.
- Discount Rate: Generally ranges from 1.5% to 3%, competitive with industry standards.
- Recourse or Non-Recourse: Primarily offers recourse factoring but is flexible depending on client needs.
- Speed of Funding: Initial funding may take a few days due to setup processes, but subsequent fundings are often completed within 24 hours.
- Revenue Requirement: No strict minimums, making them accessible for smaller firms or startups.
Why Choose CapitalPlus?
CapitalPlus’s unique focus on the construction sector means they understand the specific challenges you face—whether it’s managing cash flow between milestone payments or navigating complex lien laws.
Their additional back-office support can also help relieve administrative burdens, allowing you to focus more on project execution and less on paperwork.
6. Capstone Construction Factoring
Best for Smaller Contractors
Capstone is renowned for its comprehensive financial solutions tailored specifically for industries like construction that deal with extended payment cycles.
They offer not only factoring services but also purchase order financing and trade finance options, providing a holistic approach to managing your business’s finances.
Capstone Factoring Overview
- Advance Rates: Generally up to 85%, striking a balance between liquidity and risk management.
- Discount Rate: Typically between 1% and 4%, depending on transaction volume and risk.
- Recourse or Non Recourse: Offers both recourse and non-recourse options; non-recourse is popular among clients seeking protection against bad debt.
- Speed of Funding: After initial approval, funds are typically available within one business day.
- Revenue Requirement: Annual revenue of $100K or more.
Why Choose Capstone?
Capstone’s diverse range of financial products makes them an excellent choice if you’re looking beyond traditional factoring services.
Whether it’s bridging gaps between supplier payments via purchase order financing or securing materials through trade finance arrangements, Capstone provides versatile tools to support growth.
Choosing the Right Construction Factoring Company
So, with all these options, how do you choose the right factoring company for your construction business? It boils down to understanding your specific needs and priorities. Here are a few pointers:
1. Assess Your Cash Flow Needs
Determine how much cash you need upfront and how quickly you need it. This will help you decide on advance rates and speed of funding that work best for you.
2. Consider Risk Tolerance
If you’re worried about clients defaulting, non-recourse factoring might be worth the slightly higher cost for peace of mind.
3. Understand the Costs
Look beyond just the discount rate—consider any additional fees or hidden costs that might affect your bottom line.
4. Evaluate Customer Service
A company that offers personalized service and a dedicated account manager can make a big difference when navigating complex financial arrangements.
5. Think About Growth Potential
As your business grows, your financing needs will change. Choose a partner who can adapt with you, offering lines of credit or other financial products as needed.
Final Thoughts on Construction Factoring Companies
Ultimately, choosing a factoring company is about finding a partner who understands the unique challenges of the construction industry and is willing to work alongside you to overcome them.
In my opinion (and I’ve seen quite a few businesses navigate this terrain), it’s essential not only to look at numbers but also at how well these companies align with your values and operational style. After all, it’s not just about keeping the lights on; it’s about building something lasting—both in terms of structures and business relationships.
If you’ve had experiences with any of these companies or others not mentioned here, reach out to us so we can help fellow contractors make informed decisions in this ever-evolving field!