Plant hire companies operate in industries notorious for slow and unreliable payment.
They are often last on the list to get paid and, we’ve been asked, on many occasions, to help an owner through difficult times.
Our most recent example involved an earth moving company which had signed a long contract to work on a major road project.
While our customer issued invoices to the head contractor every week, the payment terms were 60 days from the end of the month. It meant the earth mover would have to wait nearly three months to receive some of the money owed to him.
Weekly wages bill
That made life very difficult and put the chance of enjoying solid long term work in jeopardy.
The biggest problem was that the company employed two very experienced machinery operators who expected to be paid weekly. If the owner didn’t pay them, he would lose them.
The bank was no good. It refused to extend his overdraft. He came very close to cancelling the contract even though it would have cost him a lot.
His accountant suggested he talk to us and after listening to his story we tailored a funding packaged designed specifically to meet his needs with our rates and fees explained clearly in advance.
Uninterrupted cash flow
We notified the head contractor that for the duration of the contract all our client’s invoices were to be assigned to us and payments should be paid into our bank account.
Consequently, our client would issue a weekly invoice to the head contractor.
We would then advance 80% of the value of the invoice to our client. This seldom took longer than 24 hours. More often than not it was a couple of hours.
Our client received the remaining 20% of the invoice less our fee when the invoice was paid by the head contractor.
The debt factoring agreement worked well until the end of the contract.
The machinery operators were happy because they were paid every week and our client was happy because he enjoyed uninterrupted cash flow. The head contractor was happy because he got to keep a top operator working on site.