Contract financing is an avenue for your service to get cash upfront for work you have yet to complete. This form of financing is collateralized by the contract that your business has in place with your customer. The contract financing agreement specifies turning points along with repayments data based upon your progress toward finishing the project.
Contract financing loans differ from loans originated at financial institutions or online lenders since they are underwritten based upon your customer’s creditworthiness rather than the creditworthiness of your company.
To get a better understanding of how contract financing works, consider the following:
- How Contract Financing Arrangements work
- How to Qualify for Financing
- Where to Locate Contract Financing
How Contract Financing Works
Contract financing advances business owners the majority of an invoiced quantity. The advance is repaid overtime as the billing for your project is secured. This form of financing is a tool utilized by companies that run by contractually consenting to perform solutions or create items for projects and events. Frequently, the contract financing agreement specifies the partial payment amount that you’ll need to send to your financier as you invoice the customer for the finished sections of the work. In this fashion, contract financing helps companies avoid waiting months to, possibly, receive repayments on billings they send straight to the client.
Contract financing even works when the credit rating of a company’s credit is little or poor. A contract financing company may approve a funding plan with you if the following applies:
- Your client has a great credit rating.
- You have a signed contract with a clear schedule of milestones and settlements.
You have what it takes to assure the company that you’ve signed the contract with can also complete each turning point effectively.
How to Qualify for Contract Financing
Each contract financing company independently establishes its lending criteria. However, typically they’ll review the following:
- Time in Business: The longer you have been in business, the more secure you’ll appear.
- Monthly billing: A financing company might want your monthly earnings to be a minimum of equal to the amount needed to cover the project.
- Credit scores rating of consumer: The contract financing firms will front as much as 90% of the billing quantity. Consequently, it wants your consumer to be creditworthy sufficient to pay within the allotted time.
Where to Find Contract Financing
Abington Emerson Capital, Street Shares, and Interstate Capital are three sources. You can discover more sources online, however, you will not receive a great deal of info from their internet sites. The basic procedure is to leave your contact details and also wait for a call from the finance firm. Financial institutions commonly are not involved in agreement financing. They remain in the business of lending, whereas contract financing is a type of factoring.
Contact Fortis Funding today to learn about the benefits of our contact financing program.