Step-by-step guide to construction finance

Here’s how this method of funding usually operates:

1. You raise your invoice or application for payment and send it to your customer.
2. At the same time, you also send the invoice or application to your funding provider. This is usually by upload via their portal.
3. The agreed percentage of your invoice or application is deposited into your bank account, usually within 24 hours.
4. Your customer pays their invoice or the application. This may be managed through your finance provider, who collects discreetly.
5. You receive the balance of any amount outstanding, minus the fee agreed with the provider.
   

The operational details for construction finance will vary between lenders. Many have an online system that allows you to monitor your finance balance at any time.

Why is construction finance necessary?

Construction companies usually give credit to their customers, meaning there is typically a 30-day delay between raising the invoice or request for payment and actually getting paid.

During these 30 days the construction company will have its own bills to pay, and staff to pay - either weekly or monthly, or both. 

However, in reality most customers take longer than 30 days to pay. The median average, according to Construction News (January 2021) is 41 days across the UK’s 100 largest contractors. Some customers take twice as long as that - more than 80 days - before they pay.

Construction finance exists because of this huge gap between requesting the cash and getting paid. Few businesses in the industry have the cash reserves to bridge this gap by themselves. 

Construction finance is a commonly used method for raising working capital.

Benefits of construction finance

The advantages on offer from construction finance include:

• Allows you to keep paying for materials, equipment hire and staff. 
• Helps you to stay on schedule and meet targets.
• Useful for businesses needing working capital to grow.

Construction finance is a flexible, short-term finance facility that allows you to fulfil your obligations, while avoiding the uncertainty that comes with tight cashflow.

We help businesses secure construction finance

While working capital might look the same, whatever line of business you are in, construction finance providers understand the variables and challenges that come with working in that industry.

The nature of construction means it has unique issues and working practices. We work with a wide range of finance providers who understand these issues. Whatever circumstances your business encounters, it’s likely that our providers have already helped others through something similar.

Our clients approach us either when they need additional working capital for their projects, or they anticipate they may have a need in the future. 

When you come to us, we assess your situation and match you with the most appropriate finance providers. Our aim is to help you find the most cost-effective and timely solution.

Our team of experienced finance professionals have helped many other businesses like yours.

If you think construction finance could be right for your business, get in touch with us today.

---------- Sources -----------

https://www.constructionnews.co.uk/financial/cn-payment-100-how-long-do-construction-companies-take-to-pay-14-01-2021/

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