Financing a Property Preservation Company

One of the ramifications of the burst of the real estate bubble is increased demand for property preservation services. A bank is usually responsible for the upkeep and maintenance of repossessed properties. Banks and real estate companies usually outsource these tasks to property preservation companies to ensure that these properties are kept in good condition in order to be sold at a later time.

Billing for property preservation services

Most property preservation companies have staff to handle maintenance tasks. They also require a steady supply of materials to repair properties. Repairs can range from simple things, such as paint jobs, to more complex plumbing and electrical jobs.

However, banks and real estate management companies do not pay for these services up front. Rather, they ask to be billed on net-30 to net-40 terms. Consequently, the property preservation company is responsible for paying employees and suppliers while waiting to get paid by the bank. The problem is that few business owners can afford to wait that lomg.

Slow payments create problems

There are a few ways to deal with this problem. You could delay paying vendors, or perhaps you could try to build a cash reserve to cover payments while you wait to get paid. Both of these solutions can provide results, but they are not sustainable and will fail if your company is growing quickly. A better and more sustainable solution is to get business financing to help cover your obligations.

Finance your invoices

One solution that integrates well with the industry is invoice factoring financing. This solution provides the equivalent of a quick payment, eliminating the 30-day wait to get paid and streamlining your cash flow. With invoice factoring, an intermediary financing company provides you with an advance against your invoice and then waits to get paid by your customer. Once your customer pays the invoice, the transaction settles and closes.

Generally, transactions are structured as follows:

  1. You sell the invoice to the factoring company
  2. The factoring company advances 80% as a 1st installment
  3. Your customer pays 30 to 40 days later
  4. The factoring company remits the remaining 20%, less a service fee, as a 2nd installment

Benefits of this solution

Implementing a factoring solution can have a number of benefits for your property preservation company. The most immediate benefit is that your working capital improves, and you’ll have money to pay suppliers and employees. But the most important benefit is strategic: your company will be able to provide bank and management company clients with payment terms without worrying about slow payments. If you ever need funds, you’ll be able to finance an invoice. This solution can be a game-changer if your company’s inability to offer terms was preventing you from taking on new customers.

Can you qualify?

Most property preservation companies that work with creditworthy banks or well-respected property management companies should qualify. Examples of well-known property management companies include SafeguardCyprexx, and Five Brothers. Additionally, your company should:

  1. Have good billing practices
  2. Have unencumbered accounts receivable
  3. Be free of major tax issues
  4. Be managed by individuals with industry experience

Will invoice factoring help you?

If your main financial problem is that you can’t afford to wait up to 60 days to get paid by clients, factoring invoices should help improve your cash flow. More importantly, however, factoring should provide a solid financial foundation to help grow your company.

Get more information

We are a leading factoring provider for property preservation companies. For more information, fill out this form or call (877) 300 3258.