• Construction Sector Protection Against Insolvencies

    Construction sector companies need to protect against customer insolvencies and cash flow issues as insolvencies rise.

    Construction sector companies are urged to think about protecting their cash flow as recent news reports suggest that insolvencies in the sector have increased substantially.

    A recent report in CityAM (10th of February 2020), states that whilst the total number of insolvencies in the UK has risen by just under 5%, the situation within the building and construction sector, is that there has been an almost 18% hike in the number of businesses entering Administration (a form of insolvency).

    Construction Sector Protection Against Insolvencies

    This suggests that the construction and building sector is being hit hard by business failures, and these will be having a significant impact on the cash flow of companies within the sector. Only last year we reported on potential help for sub-contractors that were hit by the collapse of Carillion. However, financial failure can affect companies both large and small.

    Even if a customer manages to avoid entering into any type of insolvency, late payment due to cash flow issues can still put a significant pressure on the cash flow of the business.

    Construction Finance & Bad Debt Protection

    There are a number of services available that can help with these issues. Firstly, bad debt protection, which is added to a construction finance facility, gives some peace of mind as it protects against your customers entering insolvency.

    If a customer becomes insolvent, and is unable to pay you, providing you have traded within a preset limit, that is set by the finance company, your invoices will be paid by the finance house. This means that you do not need to worry about customers becoming insolvent.

    The level of protection varies between providers, and you can receive similar protection from credit insurance policies, but this is one way of protecting your cash flow against the impact of a bad debt.

    The other issue affecting the sector is that of late payments. I've written previously about how late payments are affecting UK businesses generally, and again there are services available that can help improve your situation.

    Whilst not all funders will provide finance to the construction sector, there are some specialist lenders that are able to accommodate this. Even in situations where you are invoicing in stages, for parts of a project, you can receive funding against your invoices, or applications for payment which are widely used instead of credit invoices.

    The funding is typically 70% of the value of the transaction, with the balance paid when the customer pays. Whilst this means that you still have to wait for the balance of the payment from your customer, it also means that you are receiving the bulk of the value of the transaction upfront, as soon as the work is completed. This means that you can use that cash to pay suppliers, staff and to meet other overheads.

    Introduce Slow Payers

    If your customer is taking a long time to pay, you could introduce your slow payers to this type of transaction finance, in order to improve their cash flow - call us on 03330 113622 or complete a contact request.

    Cash Flow Help

    If you are experiencing cash flow problems, perhaps if you had a VAT bill to pay or other HMRC arrears such as PAYE or National Insurance, this type of funding can be used to release cash to pay off those liabilities. You don't need to have a perfect credit score, many funders are able to base their decision on the strength of your debtor book rather than your own finances.

    Share with:

Related articles

  • Read More

    How To Credit Check A Customer

    Granting credit to customers is often a leap of faith so conducting credit checks on a customer can give some element of comfort to the supplier. However, even the most well known, household names can fail.Recent experience with long established brands such as Thomas Cook, Mothercare and Debenhams (to name but a few that failed in 2019), shows that no one is immune to problems that can lead to...

  • Read More

    Mitigating The Risks Of Selling To One Major Debtor

    When you land a major customer it can provide a huge boost to your business, increasing sales turnover and generating profits. However, there is another side to dealing with a major debtor, and that is the increased risk associated with your trade being concentrated into one customer.In a previous post I covered the risks of selling to a single major customer, often called a "prime debtor". These...

  • Read More

    You Can't Rely On A Name Like Thomas Cook

    Another failure of a well known, long established company proves, yet again, that you can't rely on dealing with a "big name" to ensure that you get paid for services rendered, or products supplied. Sticking to "household names" is no longer enough to ensure that you avoid bad debts.The latest corporate failure, reported by the BBC today, was the holiday company Thomas Cook. After a 178 year...

  • Read More

    Hospitality And Construction Sectors Top The Insolvency Index

    Looking at some figures in Business Money, published from the Creditsafe Insolvency Index, it appears that the hospitality sector (hospitality, hotels, restaurants and bars) tops the insolvency index, followed by the construction sector and then manufacturing. Worrying if you supply those trades with goods or services.Figures from the Office For National Statistics suggest that generally, the...

  • Read More

    The Risk Of Customer Bad Debts Is Rising

    The risk of customer bad debts is rising as there has been an increase in both corporate and personal insolvencies. It is time to protect your business against the risk from customers taking trade credit. Protection against taking customer bad debts is still on offer at present.REQUEST DETAILS OF BAD DEBT PROTECTIONAn article in The Times dated 28th July 2018 reported that personal insolvencies...

  • Read More

    Factoring For Road Transport Company Cash Flow Problems As Bad Debts Increase

    Coincidently, just after posting my article about transportation factoring companies, I saw an article published online by the Motor Transport publication, suggesting that bad debts have risen significantly within the road transport sector.The article sites figures regarding the road transport sector, released by Credit Safe. This statistics show that in the first quarter of 2018, while sales...

  • Read More

    Retailageddon - Why Are So Many High Profile Companies In Financial Trouble?

    Can anyone explain why so many high profile companies are having financial problems? Is there cause to worry about economic stability?I first started really paying attention to the spate of emerging problems when Carillion collapsed, the second largest UK construction firm. Watching some of the social media commentators that have an interest in the credit insurance sector. Since then there seem...

  • Read More

    Protection For Suppliers To UK Retail Chains

    If you are a supplier to any of the large retail chains, you may wish to review your requirement for bad protection following a number of recent news reports from the retail sector.More problems have emerged from the sector as the BBC report that Prezzo, the Italian restaurant chain plan to close approximately a third of their retail outlets, as part of a creditors voluntary arrangement...

  • Read More

    Maplin Electronics & Toys R Us Enter Administration

    Two more large company failures on the BBC news this morning - both Maplin Electronics and Toys R Us have entered Administration.Administration is an insolvency process whereby a firm of insolvency practitioners, the Administrators, take over the running of an insolvent business (one that cannot pay its creditors as they fall due), in order to maximise the returns for creditors of the business....

  • Read More

    Pulse On Protecting Against Carillion Bad Debts

    I had an email from Pulse Cashflow Finance, one of our funding panel, that I thought raised a great point about the recent failure of Carillion. Their clients will not be suffering any bad debts.They have included "bad debt protection" for all of their clients, including those operating within the construction sector, meaning that their clients are protected from taking a bad debt.OK, so it was...

 

 

Examples of just a few of our finance partners:

funding invoice
leumi abl
ultimate finance group
marketinvoice
nucleus
acg