Factoring Progress Claims Gains Popularity with Australian Construction Subcontractors
Announcement posted by THE INTERFACE FINANCIAL GROUP 22 Sep 2011
Sydney, NSW (PRWire -23September 2011) - The Interface Financial Group (IFG), a growing source of alternative funding for Australian small businesses, announced that the company continues to offer working capital finance to small and medium sized entities (SME's) operating in the construction sub-trades who are finding it challenging to grow their businesses as a result of cashflow challenges. IFG provides a short-term finance facility including single and batch invoice factoring, and the company has a long legacy of supporting SME's in the construction sector.
Construction sub-contractors face particular cash flow challenges because the standard terms of payment in the construction sector are 30 days from the end of the month in which the work was completed. However, sub-contractors must have sufficient working capital to pay for supplies and staff before they receive payment for the work that was completed. In a highly competitiveindustry, it is absolutely critical for employers to pay their staff on time to ensure that they remain loyal and complete the work otherwise severe disruptions to the project can occur and jeopardise the success and profitability of the job.
To solve these cashflow issues, many SME's look to the debtor factoring sector which provides working capital finance based on the invoices generated in the business. Most factoring companies, however, will only finance invoices where the delivery of the goods or services have been clearly completed. Invoicing in the construction sector, on the other hand, carries several complexities and therefore requires a specialist finance company who understands the industry and the risks invoved according to David Hechter, IFG's COO in Australia.
"Construction sub-contractors generally issue Progress Claims so that they can be paid based on completing a certain percentage of a job and there may be challenges in convincing the customer that this amount of work actually has been done. In addition, most sub-contractors are required to sign very detailed contracts outlining their obligations in delivering the project and any commercial factoring company supporting this sector must be familiar with the unique nature of these contracts because these contain all of the conditions that must be met in order for the progress claim to be paid."
Factoring allows the sub-contractor SME to convert an approved Progress Claim into cash so that the funds can be used to pay suppliers and staff. The process works whereby the subcontractor would submit its Progress Claims to the factoring company who would then conduct a due diligence process to ensure that there is a strong likelihood of payment based on the character of the SME's owners, the credit worthiness of the debtor and the clarity that the work has been completed to the customer's satisfaction at the agreed percentage.
The factoring company would then advance a percentage (typically up to 80%) of the Progress Claim to the SME which is then used for working capital purposes. When the payment on the Progress Claim is due, the customer would pay the funds directly to the factoring company who then takes its fee and then rebates the remainder of the amount paid back to the SME. This straight-forward process can then be repeated in a similar way with the next Progress Claim so that the sub-contractor SME has sufficient cash flow to continue his or her business growth.
About The Interface Financial Group (http://www.ifgnetwork.com.au/index.php)
The Interface Financial Group (IFG) provides short-term financial resources including invoice factoring. IFG launched its Australian operation in 2006 following the success of its New Zealand businesses which commenced in 2004. IFG's innovative products also includes spot factoring the purchase of a single invoice or number of invoices. IFG does not require the whole debtor book.
IFG Network is the funding and operational arm of The Interface Financial Group providing capital and transactional support to IFG's international office network. IFG has grown to over (150) international offices in Australia, UK, the United States, Canada, Ireland, New Zealand, and Singapore.
Each IFG office is managed on a local level, providing immediate service to clients with local knowledge and experience. This makes IFG unique to all otherfactoring companiesin the Australia. The IFG team has substantial business experience and expertise in numerous diverse areas, including accounting, finance, law, marketing, banking, etc.
Headquarters:
The Interface Financial Group
Suite 1, Level 3, 179 New South Head Road
Edgecliff, NSW 2027
T: Toll Free: 1300 957 900