| By :
Kristin Gabriel
Many businesses in the building industry use McGraw-Hill's "Construction Outlook 2010 Midyear Update" for 2010. It addresses the fact that this is the first year of recovery for total construction starts. But because of the slower expansion surrounding the overall U.S. economy, the improving trend for single family housing paused in late spring, making the gain for full year 2010 smaller than originally forecasted. The loss of momentum for commercial building in 2010 has not been as severe as it was for the year 2009, but losses remain fairly large. Institutional building retreated, and was made worse by the eroding state and localized fiscal situation. There has been stronger activity for environmental public works and a rebound for healthcare facilities. And, while the lift to public works construction from the federal stimulus act is still present, the push directed at highway and bridge construction has subsided. Trends include the fact that by early 2010, real estate had improved in some markets in the U.S., while enjoying a significant boom in China, Canada and a few other areas. Eventually in virtually all real estate markets a bottom will be reached and business will pick up gradually. But for now, many major development projects have been downsized, delayed or cancelled. Overall home sales may rebound reasonably well by 2011 or 2012 if the global recovery begins. But sadly many owners of home and commercial properties will realize a current value of less than what they paid, and their mortgage debts at higher levels than the property values. As far as commercial property, investment sectors remain slow while vacancies remain high, especially in office markets and retail shopping centers. Commercial mortgage delinquencies and foreclosures will continue, while funding for speculative commercial projects will remain hard to obtain. U.S. banks had $1.8 trillion in commercial property loans on their books in early 2008, and now write offs on those loans are projected to run more than $200 billion, or at 12 percent, by the end of this year. Additionally there are trends towards consolidation of development and construction firms, with focus to debt reduction risk management and cost control. Currently many construction firms have survived only through the use of construction factoring. Construction companies or contractors no longer have to wait for payment before starting on the next phase of a project, or to begin construction on a new project. Factoring provides subcontractors with a quick turnaround on accounts receivable due for completed stages of a construction project, thus speeding up cash flow and improving the company's ability to start immediately on the next phase of a project. There are very few factoring companies that provide construction factoring for short term financing against completed construction jobs, and immediate payment for finished project stages. Most factoring companies don't expect to buy 100 percent of a company's receivables, and there are no minimum or maximum sales volume requirements. Upon receipt of invoices, the factor checks the credit of the debtor named on the invoice and makes sure that the sale represented has been satisfactorily completed. Once this is done the debtor is advised of the purchase by the factoring company and the client receives their funding.
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