It’s not uncommon for construction companies to run into cash flow problems for a number of reasons:
- Owners may have a lot of cash tied up in supplies and building materials.
- They might have to pay contractors and subcontractors before a customer pays his or her bill in full.
- The price of materials can unexpectedly increase, causing owners to front even more cash during a project.
- Instead of leasing equipment, owners might decide it makes more sense to buy it, which ties up cash flow.
- A job might go over budget.
- The company could be sued.
Typical Cash Flow Solutions
To solve their cash flow problems, construction business owners often look outside company walls for additional financing. Some of them might see whether they can get loans from traditional banking institutions, nonbank lenders, or groups like the Small Business Administration. Others might choose to try different financial vehicles like invoice factoring services or merchant cash advances.
There’s no sense in spending a ton of time applying for a loan you probably won’t get in the first place, as banks and the SBA are extremely picky when it comes to approvals these days. You could opt to try the nonbank lender route, but only if you’re prepared to pay significant fees. While factoring and merchant cash advances can help you solve your cash flow problems, you’ll have to fork over a good chunk of your profits to take advantage of such services.
The Better Cash Flow Solution
Construction business owners facing cash flow problems aren’t completely out of luck, however. If your customers take a long time to pay up and you’re short on cash, you can use an invoice financing service like Fundbox to advance payments on unpaid bills. You then have 12 or 24 weeks to repay the advance, plus a small fee.
Here’s how it works: Create an account and connect your accounting software to it, which should only take a few minutes. Select which invoices you want cleared with a single click, and funds will show up in your business bank account in as soon as one business day. With the new Fundbox iOS mobile app, it’s easier than ever for construction business owners to clear their invoices wherever they happen to be: at the office, on the road, or at a job site.
Just like any other business, construction companies need access to cash in order to grow. Thanks to Fundbox, construction business owners get the peace of mind that comes with knowing funding is always only a tap of the finger away—which makes it easier to say yes to more projects.