- 30 Jul
Construction Financing For Contractors
We are trying to raise awareness of construction financing for contractors which is a little known form of finance available to UK subcontractors in the construction sector. Any help you can give us by sharing our post about this is much appreciated.
The Need For Construction Financing For Contractors
We researched the need for this type of gap funding. Three quarters of sub-contractors that we polled that raised applications for payment, 85% of them said they would benefit from being paid immediately they raise the application, rather than having to wait for the customer to pay. In this particular sector that can be a long time, as many main contractors tend to take extended credit periods. Even if a subcontractor raises traditional sales invoices, a similar service is available to release the money from invoices, before they are paid.
Construction Financing Companies
So there is a very clear need for construction financing for contractors, however there are very few companies that provide this kind of specialist financing. You have to know which finance companies offer construction finance and there are great differences between how the various providers operate.
Many contractors are unaware that their own financial position is of little importance when applying for this kind of finance. The criteria are based on the strength of the end customer, the main contractor, who will ultimately pay you. Therefore you can piggyback on the financial strength of your customer if you don't have the trading history, balance sheet and assets to support other types of finance, such as a business loan.
The funder will also want to take a look at the contracts that govern the project, to set a level of advance against your applications, or invoices, that reflects how collectable the debt is likely to be. The whole process can be completed quickly if you need to raise money in a hurry, and you can use the funds that are released for any purpose. This type of funding can work particularly well if you need to finance a large project that you are debating whether or not you should take on. It can give you the cash flow peace of mind to take on work that you might not have been able to afford to finance otherwise.