Bridging Finance & Factoring

The context of finance is one of the major factors affecting the smooth implementation of a project. Finance plays a vital role in the success of businesses. It provides companies with the necessary funds to start, operate and expand their operations. Without adequate finance, businesses cannot pay for essential resources such as employees, supplies or equipment needed to maintain their daily operations.

In most projects carried out in Sri Lanka, payment delays by Employers to Contractors leads to delay of contractors’ performance and cause time performance problem. This may also lead to disputes between owner and contractor. All of which will affect the overall performance of project execution.

The Contractors in general always depend on the revolving capital, either from Banks or by obtaining funds by any other means. Therefore, when the Employer delays payments to the Contractor, the Contractor in-turn does not have any other option, other than to abandon or curtail the project.

CGF understanding the situation, introduced the concepts of Bridging Finance and Factoring. Here once the bills are certified by the Employer, CGF intercedes either in the form of providing Bridging Finance or Factoring, in order to enable the Contractor to continue with the work. CGF usually does not charge and this will be a part of the free service given to the Contractor when implementing projects.

There are instances that when the Contractor has proved good project performance throughout, then CGF will assist the Contractor in revolving capital, project financing and funds for equipment. These are treated as part of the free service by CGF to contractor’s with good standing.

Bridging Finance

Bridge financing, often in the form of a bridge loan, is an interim financing option used by companies and other entities to solidify their short-term position until a long-term financing option can be arranged. Bridge financing normally comes from a bank or venture capital firm in the form of a loan or equity investment.

Bridge financing "bridges" the gap between the time when a company's money is set to run out and when it can expect to receive an infusion of funds later on. This type of financing is most normally used to fulfill a company's short-term working capital needs.

Factoring

Factoring on the other hand is when an intermediary agent provides cash or financing to companies by purchasing their accounts receivables. A factor is essentially a funding source that agrees to pay the company the value of an invoice, less a discount for commission and fees. Factoring can help companies improve their short-term cash needs, by selling their receivables in return for an injection of cash from the factoring company.