Construction Finance is provided by a handful invoice finance companies in the UK. It releases funding either against uncertified applications for payment, staged invoices or invoices for fully completed work. Businesses that can benefit from this type of facility are either contractors or sub-contractors in the construction industry.
Such a facility will help to improve cashflow and assist with growth as new contracts are taken on – it means a business does not have to rely on receiving early payment from its customers before making staff and supplier payments.
Depending on the nature of the work undertaken, prepayment (the amount advanced against invoices) can vary between 45% and 70% – although this may increase to 80% for more straight-forward projects.
Most funders would require a minimum turnover of £500k per annum and it is usual that personal guarantees are provided in support. It is also usual that directors are homeowners (it would not be the norm to take a charge over a domestic property, but the invoice finance companies take more comfort on providing this type of facility to a homeowner).
Other general stipulations would apply to Construction Finance as would apply to a general invoice finance agreement in that evidence of a strong paper trail and well-rated debtors would make an application more attractive.
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