Don't be fooled by appearances, Constrafor's Early Pay Program (EPP) may resemble invoice factoring on the surface but our approach and values are worlds apart. While traditional construction invoice factoring raises red flags for GCs with its aggressive, bridge-burning tactics, EPP is purpose-built for construction by people who understand the industry's unique challenges. With EPP, we've built a smarter, safer way to manage construction cash flow. Let's dive into the major differences between traditional invoice factoring and Constrafor's EPP.
Traditional invoice factoring isn’t just a ‘red flag’—it's a profit-killer. Here's the stark reality:
Typical factors squeeze you for 8-12% of your invoice value. Constrafor's EPP, on the other hand, comes in at a lean 2% on average. This isn't just about cheaper costs; it's the difference between barely staying afloat and actually growing your business.
While the majority of subcontractors state they're pulling in gross margins above 15%, maybe even 25% for some trades, we’ve found that most are looking at net margins around 5-7% per project. Our 2% fits comfortably within that profit margin. On the flip side, traditional factoring services are not just eating some of your profits; they're making your projects downright unprofitable.
With EPP, you're positioning your business for long-term success instead of merely surviving. We're not offering a stopgap measure for those who've exhausted all other options. Instead, EPP is a strategic financial tool that propels your business forward without weighing you down.
In the construction industry, your reputation is everything. Traditional invoice factoring can put that reputation at risk. When factoring companies interject to control communication with GCs, it's not just an inconvenience, it's a potential relationship killer. Their aggressive collection practices can leave your hard-earned relationships in tatters.
Factoring companies often take over invoice collection, leading to:
With Constrafor's EPP, your relationships remain intact. We understand that in construction, trust is built project by project, handshake by handshake. That's why we keep you in control of the working relationship with your GCs. No third-party interference, no aggressive collections—just you and your GCs working together as always. And at the end of the day GCs are our customers too, so it simply wouldn’t benefit us to aggressively go after them.
In the past, GCs have seen using traditional factoring as a signal that a subcontractor's business is struggling financially. This perception can be devastating in an industry where reliability is paramount. While there are a slew of reasons why a business might turn to cash flow financing, it's important to avoid inadvertently sending the wrong message to General Contractors, potentially sewing doubt into your ability to complete projects.
Constrafor's EPP, on the other hand, can be seen as a smart financial move. Choosing a financing option that doesn't add debt to your balance sheet, avoids hidden fees and compounding interest, and unlocks the cash flow capital that lets you grow at your pace shows that you're proactively managing your cash flow, not desperately seeking a lifeline. With EPP, you're not signaling distress—you're showcasing financial savvy.
The hidden cost trap of traditional factoring is like quicksand for your profits. High fees, high interest rates, and compounding interest can quickly erode your bottom line. Worst of all, hidden fees, unexpected charges, and variable rates on advances can make it nearly impossible to predict your true costs.
Constrafor's EPP believes in transparency. Our pricing is straightforward and predictable. No hidden charges, no compounding interest—just a clear, upfront cost that allows you to plan with confidence. We believe your focus should be on your projects, not on deciphering complex financial statements.
Moreover, unlike factoring companies, Constrafor gives you the option to choose how much you're advanced on each invoice and how often you submit invoices. This flexibility can significantly reduce your fees over time, putting more money back into your business when it makes the most sense for you.
Construction isn't a one-size-fits-all industry, so why should your financing be? Traditional factoring's rigid terms and inflexibility can leave you struggling to adapt to the dynamic nature of construction projects. You're often forced to factor invoices you'd rather keep, or stick to payment terms that don't align with your project timelines.
EPP is built differently. We understand that every project, every season, every subcontractor is unique. That's why we offer flexibility in which invoices you choose to factor and terms that can adapt to your project timelines. With EPP, your financing works with your business, not against it.
Constrafor works with subs to flexibly work around unexpected delays on repayment terms. We trust our credit review process and work to provide the flexible financing you need when you need it most.
Traditional factoring can feel like a short-term solution that turns into a long-term problem. The immediate cash infusion is appealing, but many subcontractors find themselves trapped in a fee cycle that's hard to break. As your dependence on factoring grows, so does the strain on your overall financial health.
While factoring provides upfront cash, the high costs can often negate any positive impact on cash flow. Factors may also place restrictions on the amount of funding available, limiting a contractor's ability to take on new projects.
EPP is designed to be a tool for growth, not a crutch. Our goal isn't to keep you dependent on our services, but to help you build a stronger, more financially stable business. We provide the cash flow you need now, while also offering insights and support to help you improve your financial position for the future.
Unlike traditional factoring companies that often have a "one-size-fits-all" approach to financing, Constrafor becomes your construction growth capital partner. Our team comes from the construction industry and knows its unique challenges and opportunities. We didn't get into this business just to profit off of subs and GCs—we aim to help subs succeed.
By providing reliable, flexible financing and industry-specific insights, we're not just helping you manage cash flow, we're helping you build a foundation for sustainable growth.
In construction, every decision you make impacts not just your current project, but your long-term success. That's why we've built EPP to address the real needs of subcontractors, avoiding the pitfalls of traditional factoring. With EPP you're not just managing cash flow, you're partnering with a team that's committed to your success in the construction industry.
Let's cut to the chase. Constrafor's Early Pay Program (EPP) isn't just another financing option—it's built specifically for construction, unlike traditional factoring. Here's what that means for you: Your relationships stay intact because we don't mess with your client communications. You're in control, choosing which invoices to finance and how much you need. No surprises with our pricing. It's clear and competitive, and what you see is what you get. Access capital without the factoring stigma and give yourself room to take on bigger projects and grow your business.
Bottom line? EPP gives you the cash flow you need without the headaches of traditional factoring.
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