Long payment terms and late payments are some of the biggest problems facing construction firms. Construction finance is designed to ease these cash flow problems by advancing cash against uncertified applications for payment, staged invoices, or sales invoices.
How does construction finance work?
Construction finance bridges the gap between completed or partially completed work and your customer paying you. Once you have outstanding billing — such as an uncertified application for payment, staged invoice or sales invoice — you submit it to the construction finance lender.
Once the lender is happy with the information you’ve provided, they provide a prepayment (effectively a construction loan), normally within 24 hours. This process often takes place online.
The prepayment varies depending on how creditworthy your customer is and other factors such as your annual turnover, credit history and number of debtors, but can be as much as 70% of the total value of your application for payment. Some facilities give you the option to get an advance against a specific invoice or application for payment, or finance your entire sales ledger.
You can use the cash for any business purpose
If you raise new applications for payment or new invoices, new advances are made
It’s possible to get construction finance even if your contract is complex and there are contractual debts, project-based transactions, retentions, or extended payment terms.