Factoring for Panel Builders ?
Recently, I was asked by a contractor to make a quotation for a big project of a big telecom company. We didn’t have the right financial capabilities to afford this project.
I was looking for a new way of financing this kind of businesses and I’ve found a blog talking about factoring with an interesting article about two real examples of factoring usage, and this helped us to discover this interesting way of financing.
I also found out some banks who are already offering factoring services all over the world: BNP Paribas, Santander, ING, UBS, HSBC . . .
It would be great if you have any experience of using factoring for panel building activity to comment.
Thanks.
Dan,
I appreciate you linking to my blog post about factoring. There are several things folks in your industry should consider. First, if you are delivering turnkey products/services with no retainage and no progress billings, nearly any factoring company should be willing to work with you.
The ones you show above are very large factoring companies that tend to like very large factoring projects. There are also thousands of smaller factoring companies that would finance panel building if the above considerations are met. If you are subject to progress billings or retainage, the list of factoring companies that will work with you is substantially less. Progress billings and retainage put you into the category of “construction factoring.” There are a very few companies who will factor construction deals and they are more expensive because the risk is higher.
I would be happy to give free advice or direct your readers to a factoring company that would meet their needs if contacted.
Sam Thacker
http://www.lesliethacker.com
+1 512 990 8756
Hi I am interested in your experience on Factoring and would be interseted to know if you have any experience of discounting letters of credit on a project by project basis.
We have a project at the moment where this could be helpful.
Thanking you in advance
Brendan Meehan
BMC Manufacturing Ireland
As general manager of a group mostly focused in panel building activities in France, I must say that I am very happy with this solution.
We have been using factoring for some years, and it brings not only financial flexibility, but also improvement of our average customer payment delay, by almost 20 days: as we completely outsourced the receivables management to the factoring company, they manage payment with our customers, not us anymore, so our customer relationship is no more influenced or influencing payments, bringing faster payments AND simplified customer relationship for us.
And though many people believe it’s an expensive solution, it’s just the contrary from our experience.
If you look at the 3 parts of our factoring contract:
• Outsourcing of the receivables management is cheaper, compared to fixed costs for 2 people when we were doing it internally (factoring company is specialized in receivables management and have the right tools to be more effective)
• Costs associated to financing are comparable (or better) than with other financing products (bank loan, discount …). In our contract, we only pay for the financing amounts we actually use
• Credit insurance is a credit insurance, nothing really specific with factoring
So from our experience, factoring is really a financial product Panel Builders should consider.
Gilles FRADIN
ITEC group-France
I have over 18 years experience in the banking and factoring business. While construction contractors and material suppliers are sometimes hard to factor (because of subcontractor liens), many factoring companies will do them. I believe Giles is correct in part of what he is saying about cost. When cost is measured on an APR basis, factoring is often more expensive than other types of financing. However, when one compares the cost in terms of the currency of their country to finance the project, factoring can be less expensive. More importantly, we don’t feed our families with APR, we feed them with dollars, Euros, or British Pounds.
I am not familiar with using discounted letters of credit on construction projects. We use them all the time for import / export transactions involving commodities.
Lastly, credit insurance may not benefit a contractor but may benefit a material supplier. I don’t know which of those categories panel builders fall within. Often the cost of credit insurance is ofset by a decrease in the cost of factoring or other financing because the factoring company has less risk.
Sam Thacker
Business Finance Solutions
+01 512-697-9509