What is Construction Finance?
Construction finance offers fast access to working capital. This is advanced against your uncertified applications for payment or staged invoices, usually within 24-hours, so you don’t have to rely on payment from your customer before you can make staff and supplier payments, or take on new projects.
How does it work?
Construction finance releases extra cash from your contracts when you need it. Your business sells unpaid invoices to a lender in return for a proportion of their value.
You sign an agreement with a lender which will detail the proportion of the total invoice value you will be paid immediately, what balance will be paid to you when your customer pays the invoice in full, and how much you will pay the lender for providing the facility (usually called the initial percentage of prepayment percentage).
What are the benefits?
Construction projects are unique, and it is extremely difficult to predict when the money for a project will come in. In the meantime you may be required to pay for materials and sub-contractors, which means having strong cash flow to plug the gap until you are paid.
Not only does it create immediate cash flow problems, it can also limit your ability to bid for new projects, as you don't have the working capital to taken them on. Late paying contractors can hamper your ability to finish a job, which is likely to exacerbate the payment process further; and it can increase business risks from bad debt.
Whether you are a contractors or sub-contractors, construction finance provides you with a percentage of the cash you will earn from contracts immediately, which will enable you to plan your business more effectively, so you can pay staff, sub-contractors and suppliers, and provides the certainty you need to bid for new contracts confident you will have the financial means to deliver them.
How can we help you?
The Finance Exchange is independent from lenders, and has years of experience helping clients source and set up finance arrangements, so we know the best lenders to work with and can advise you which of the array of products and terms and conditions are most suited to your business and your current needs. That's why we say “let our experts take the strain.”
If you want help or have any questions, why not contact us? We are here to help!