Construction Factoring

By Michael Russell

Perhaps no other major industry is better suited to factoring than the building and construction industry. For many years, the peaks and valleys of construction seasons and cycles have troubled subcontractors and general contractors alike. Now factoring offers a cost effective and simple solution that can benefit both the contractor and the factoring company. Many factoring companies have even gone for far as to specialize in factoring for the construction industry, learning the unique language and needs of subcontractors.
Generally, banks and construction subcontractors don't get along with each other. Construction is a risky business and banks are only interested in safe, reliable clients. If the contractor is new and growing, or does not have several years of positive cash flow, banks won't even let the contractor in the door let alone give them a business loan.
There are many reasons why construction is so financially volatile, but one of the main reasons is the time delays and cost overruns; that are almost a given in construction. You almost never ever hear of a building being completed on time and under budget. The architect and client inevitably change the plans along the way, causing increased costs and construction delays. If you are the plumbing subcontractor for the new town school and the local school board decides to change the plans after it is started, you truly have no idea when you will get paid. In the mean time, the plumbers that work for you are expecting to be paid weekly - and you are expected to order and have on hand all plumbing materials needed for the school. The bank won't help the plumber, but factoring companies are perfectly suited to this situation. By purchasing the plumbing subcontractors accounts receivable, for a small factoring fee, the subcontractor can continue on with their business. Both the construction subcontractor and the factoring company benefit.
Another problem with the construction industry is the scope and number of projects that can be handled at one time. Building a building is a big deal. A contractor simple can't take on more than a small hand full of projects at a time. And buildings are expensive. Contractors don't have the resources to take on more than a couple projects at a time. Most other industries don't have this problem. For example, a company that builds and sells vacuum cleaners can make thousands of vacuums every day, with only a small amount of the companies' resources and capitol invested in each individual vacuum. After a while, cash flow evens out and business is relatively steady. Construction companies can't do that. If problems with a project get to be too much for the poor plumbing company, they may have to go out of business. On the other hand if Mrs. Jones has trouble with her vacuum cleaner, the vacuum company can easily replace it without having to go out of business. Again, the bank won't help the plumbing company but factoring companies are designed to handle just this type of ebb and flow in construction.
Factoring companies can't change the nature of construction. Construction will always be subject to massive peaks and valleys and each project will be a huge investment of resources and capitol for contractors. Because of this, the factoring fees tend to be a little higher than with other industries - for example 3 or 4 percent versus 1 or 2 percent. And the amount withheld to cover disputes is usually closer to 25 percent rather than 15 percent. But for the construction subcontractor, this is usually a small price to pay for the peace of mind of knowing they won't have to file for bankruptcy.
Michael Russell Your Independent guide to Factoring
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Can a Husband and Wife be in Business Together?

By Jeffrey Hauser
During my 25 years as an advertising consultant, I had many husband and wife business teams as clients. In my mind, it was the good, the bad, and the ugly. I wasn’t necessarily referring to their physical attributes. But it usually did not lead to a positive outcome. Not that all of these type of partnerships are doomed, but the majority were less than successful. The reasons are varied and easy to enumerate here:
You have a vested interest in the spouse, first, before work.
It’s hard to separate business and leisure.
How can you tell your spouse they made a bad business decision?
If you have an argument at work, do you bring it home?
You have no chance to escape talking about the job or company.
Even if you say it’s work-related, it’s always personal.
If you divorce, how do you divide the company?
Can you fire your spouse if they are bad for business?
What if one ends up doing all the work?
Your personal issues, like adultery, carry over into the business.
Who will make most of the big decisions and why?
Who gets paid the most and why?Now, in a good relationship, both people should share all the burdens and rewards. They need not bring work home, but that’s somewhat impossible. If the two of you are the top executives, then discussing the company at home will be a common occurrence. Even going out to a restaurant may eventually lead the dinner conversation back to work-related discussions. How do I know so much? My wife is the CEO of our family business. I am the lowly Marketing Director, albeit, by choice I might add.
We formed the business a few years ago when I retired from my previous job. She then retired the following year and we began designing a website to provide health information. She had been an RN and I was an advertising consultant. We had been married just a year when all this happened, although we had both already raised our separate families. So children was not an issue. But I was a bit apprehensive about a home-based business where we would be living and breathing this new venture together, without a break from one another.
It had been my prior experience with other business couples that gave me that negative implication. I had seen the bitter feuds and arguments that resulted from power struggles and bickering, common in marriages. But this was over advertising, budgets, and the future of a business. It often reached a whole new level of ugliness. Most of the time, the husband was the president and the wife the VP or accountant. But the lines blurred when money was the topic and the wife would take charge of the finances, as if I were stealing from their retirement fund. It’s very awkward standing there while a couple fight in a personal manner. It’s more like witnessing a social war than a company dispute. The words turn to an attack on character and qualifications rather than business savvy. They might even bring up non-business issues that I prefer not to know. But that’s what couples do, when their emotions take over.
That’s also the main difference between a couple running a business and regular corporate partnerships. The co-owners will be adversarial but objective. The couples are too close and pick on the weaknesses they already know how to exploit. So, do I regret being married to my business partner? No, I am luck because we rarely fight and seem to agree on most things. But I feel we are the exception and therefore I do have a word of warning. If you already have a so-so marital relationship, don’t expect running a business together to make it any better. If anything, the additional strain and stress will push it to the limit. Try to separate the two when back at home. Talk as little as possible about the company when on vacation or just relaxing. The business will still be there with all it’s troubles and benefits alike. And perhaps you’ll still have a chance to be successful at both.
Jeffrey Hauser was a sales consultant for the Bell System Yellow Pages for nearly 25 years. He graduated from Pratt Institute with a BFA in Advertising and has a Master's Degree in teaching. He had his own advertising agency in Scottsdale, Arizona and ran a consulting and design firm, ABC Advertising. He has authored 6 books and a novel, "Pursuit of the Phoenix." His latest book is, "Inside the Yellow Pages" which can be seen at his website, http://www.poweradbook.com and he is currently the Marketing Director for http://www.thenurseschoice.com a Health Information and Doctor Referral site.