What is Construction Finance?

Construction Finance is a specialist invoice finance product, used by businesses in the Construction industry and associated trades. This product is only offered by a small pool of UK funders that understand and have an appetite for the often-complex nature of construction contracts. 

Your company may complete a stage of a contract and raise an application for payment. You can then release funding within 24 hours of raising a certified or uncertified application for payment. Typically, you can receive a higher advance if you can wait for the payment certification to be received.

With long payment terms and late payments continuing to be a challenge in the construction industry, faster access to your capital can help you with enabling costs on new projects and to meet your own ongoing financial commitments, such as materials, payroll and HMRC

Construction Finance can offer additional benefits such as credit control. This allows the funder to collect outstanding invoices on your behalf, confidentially if required so they are unaware of the funder’s involvement. You can also include bad debt protection which protects your advance in the event of client insolvency or non-payment of invoices. 

If you are a main contractor or sub-contractor working in the UK construction this could be an ideal product for you. Whether you are working under a contract, framework agreement or purchase order, or if you raise an application for payment for part or completed works, we can guide you through the options available.

Summary of Benefits

Construction factoring in the UK offers several benefits tailored to the specific needs of the construction industry.

Construction finance provides immediate access to funds tied up in unpaid invoices, ensuring a steady cash flow. This liquidity is crucial for covering payroll, purchasing materials, and meeting other financial obligations during the project lifecycle.

Construction projects often face delays in payments due to extended project durations or complex payment structures. Construction finance allows construction companies to avoid cash flow interruptions caused by delayed payments, providing stability and financial security.

Construction finance enables construction firms to bridge the gap between invoicing and receiving payments, ensuring access to working capital for ongoing operations, subcontractor payments, and project management costs.

As construction companies take on larger projects or face seasonal fluctuations, construction finance offers a flexible funding solution that grows with the business’s invoicing volume, supporting expansion and scalability.

Construction finance companies can handle the collection of invoices, reducing the administrative burden on construction firms. This allows them to focus on project execution and client relationships without spending resources on chasing payments.

Predictable cash flow through construction finance can facilitate better financial planning, enabling construction companies to allocate resources efficiently, bid on new projects, and manage ongoing construction work more effectively.

Some construction finance arrangements include credit protection services, safeguarding construction companies against potential losses due to customer insolvency or non-payment.

Construction finance provides a consistent source of cash flow, helping companies navigate through cash-intensive projects, unexpected expenses, or economic downturns with greater financial stability.

Overall, construction factoring in the UK serves as a strategic financial tool specifically designed to address the unique cash flow challenges faced by construction firms, ensuring smooth operations and sustained growth within a challenging industry.

We would be delighted to talk to you about your requirements and to put together a shortlist of construction finance funders that can help you. We will save you a substantial amount of time by making sure you meet the specific criteria of each funder, before putting together a shortlist and making any introductions.   

For a deeper dive into the reasons why businesses use Construction Finance, please see our video.

Our Other Invoice Finance Services

Invoice Factoring

Invoice Factoring is a popular choice for newly established or growing businesses. The funder will advance between 85%-90% of the invoice value and manages the credit control on your behalf, confidentially if required.

Invoice Discounting

Invoice discounting is a valuable financial tool for businesses seeking enhanced cash flow management. With invoice discounting, businesses maintain control over their sales ledger while unlocking the cash tied up in outstanding invoices.

Single Invoice Financing

Single invoice finance, also known as Spot Factoring, allows you to receive an advance against single or selected invoices. This can be used as and when required, without the need for any long-term commitment.

Woman using a calculator for some calculations

Revolving Credit Facilities

Established businesses with a turnover above £1M often prefer a revolving credit facility. With no requirement to upload invoices and typically available without a personal guarantee, a revolving credit facility is a fantastic ‘In case of need’ product.

Switching Funder

If your Invoice Finance facility is due for renewal, it’s worth reviewing your fees, service levels, funding amount and concentration limits to see if there is a better deal, or a more suited facility on offer in the market.