Case study: Invoice finance for trade contractors

Invoice Finance for Trade Contractors – A Case Study

BEING paid is always a challenge in the construction industry, especially for subcontractors who have to wait months for progress payments.

Below we explain how OptiPay helped a Sydney electrical contractor access a $75,000 pay cheque when his business needed it most.


Our client, an electrical contractor from Sydney with three employees, accepted a significant contract to work on a large block of apartments.

It was a job that was going to provide a constant flow of work and income for almost four months.

Our client could only issue an invoice once certain stages of the project were completed, and then he had to wait another 30 to 45 days before the payment arrived.

The problem

On most Australian building sites, the overall progress dictates a sub-contractor’s work schedule and delays in other parts of the project can hold everybody up.

Faced with this exact situation, our client took an extra three weeks to have the first stage of his work schedule completed.

Our client couldn’t wait that long for his first payment, which was $75,000.  He needed immediate cash flow in order to pay his own suppliers and employees.

Top of his priority list was hiring an extra electrician to help make up for lost time – so that he could start his next project on time.

Waiting at least a month to be paid is normal for the industry, but the extra four-week delay meant our client had to take action to smooth out his cash flow.

The options

Many small and medium-size subcontractors are unable to use a commercial overdraft or other traditional debt facilities to finance their businesses.

Furthermore, while commercial overdrafts have some advantages, they also have some problems.

They require collateral, such as real estate or personal property. They also have inflexible limits that are governed by your current assets rather than by your sales potential. Lastly, the approval and qualification process can drag on for weeks or longer.

The smarter solution

The better way to solve this cash flow problem is by using invoice finance to access the money you are owed much sooner.

For our client the financing process was simple. He worked with OptiPay to finance his verified invoices in two installments.

The proceeds of the sale of the invoice was deposited into his account as soon as he submitted the invoice for financing.

He used these funds to pay salaries and buy tools and materials, and get on with the job with plenty of cash in the bank.

The electrician was also able to hire a casual worker to help complete the job to the original schedule.

The residual payment was deposited into the client’s account once your customer paid the invoice.

The service fee was deducted from the second installment.

Types of contractors that can use this solution

  • Electrical contractors
  • Roofing contractors
  • Builders
  • External facades
  • Pipe fitters
  • Plumbing contractors
  • Flooring contractors
  • And more

The most important requirement is to have reliable construction industry contracts in place and be working with strong debtors.

If your clients have good commercial credit and pay their invoices reliably, you have a very good chance of qualifying.

Some traditional cash flow financing options require you to factor all your invoices.

With OptiPay, you can choose to sell multiple invoices, or just one of them and you can select which debtors you would like to fund without the requirement to sell your entire debtor ledger.

Need construction invoice financing?

We are a leading invoice financing company and can provide competitive solutions. For a quote, fill out this form or call 1300 694 686.

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