- 03 Dec
Funding Available As The Construction Sector Downturn Eases
New figures from Reuters (03/12/19) suggest that the downturn in the construction sector has eased in the last month, despite not returning to growth. Funding remains available to assist companies within the construction sector that are growing, or need finance to get them through these difficulties.
Construction Sector Index Improves
Reuters report that the IHS Markit/CIPS UK Construction Purchasing Managers' Index (PMI) rose to 45.3 from 44.2 in October to reach a 4 month high, which was above all forecasts.
Whilst the index remains below the 50 threshold for growth, and with all three sub-sectors - housebuilding, commercial and civil engineering in decline, the news is a welcome boost for the sector.
Uncertainty over Brexit and the forthcoming general election are thought to be contributing to the situation, as companies put off decisions to invest and expand - whilst awaiting the outcomes of these events.
Construction Funding Remains Available
Despite the sector's recent downturn in performance, construction sector funding remains available to businesses that are experiencing growth (and need to fund that expansion) or those that are facing financial difficulties due to the current outlook.
Construction sector funding is specialised finance that can be provided against unpaid sales invoices, or applications for payments against building sector projects. Whilst traditional invoice finance companies avoid the sector, there are a small number of specialist niche funders that use sector expertise to value the receivables, against which they fund.
Where companies are rapidly expanding, receivables finance can allow them to fund that growth as it does not suffer from the same restrictions as traditional bank finance, such as loans and overdrafts. The level of funding is determined by the level of sales, hence the funding grows as you grow, unlike some bank facilities that require renegotiation.
Similarly, when companies are experiencing a downturn, and customers are not paying quickly enough to enable them to meet their liabilities, it can provide survival funding. Receivables funding can unlock the cash that is tied up in a company's sale ledger, easing cash flow pressures.