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Construction companies face many complex challenges day-to-day. From long payment cycles to complicated supply chains it can be difficult to operate in a streamlined and efficient way and to effectively navigate a path around these issues.
Funding is one particular area where construction businesses need to meet specific requirements - accessing expensive hard assets in a way that’s affordable to them and that doesn’t use up valuable capital.
So what finance options are available for construction companies and how do you access them?
A range of alternative financing options exists that are ideal for construction industry needs. Construction supply chains are notoriously complex but a specific form of funding can ease the problems that threaten to disrupt entire construction projects.
Construction supply chain finance
Large construction companies generally seek supply chain finance to prevent disruption. This type of funding is also a significant help to smaller suppliers as they receive immediate payment from the financier of buyer-approved invoices.
The immense benefits of this allow small construction suppliers to operate with more ease and confidence that they’ll have the working capital they need when they need it. Crucially, they don’t have to seek this financing solution themselves.
Their buyer arranges the finance and can also take advantage of an extended repayment period. Additionally, this type of funding relies on the credit rating of the larger company, making it more widely accessible.
Equipment finance and refinancing
Equipment finance allows construction companies to purchase expensive equipment affordably. Hire purchase contracts enable ownership once the final payment has been made, but the flexibility of leasing may also be attractive.
Refinancing existing pieces of machinery introduces a significant cash lump sum into the business, with no interruption in the use of the asset. The money can meet a range of financing needs – funding new projects, for example, or providing reassurance regarding cash availability.
Given the long payment cycles inherent in the construction industry, a form of funding that reduces the risk of cash shortages and minimises bad debts could be crucial for some companies.
Invoice financing provides a regular cash injection, the value of which is based on your unpaid invoices. Essentially, a factoring company or invoice discounter releases around 90 per cent of the value of eligible invoices, typically within 24-48 hours. The remaining amount is then paid when your customer pays.
This regular boost to working capital means you can bid with confidence for new projects, knowing you can fund any extra requirements or grow with your cash flow being supported.
UK Business Finance are commercial finance brokers with extensive experience in helping construction companies obtain the best type of funding for their needs. We take a whole market approach and will guide you towards the right types of finance with the best quotes.
Our services are free of charge and we can also make an application for construction funding on your behalf. Please get in touch with one of our expert team to find out more about finance for your construction company.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
What are the finance options for a growing or expanding business?
With such a wide range of finance options available for growing and expanding businesses, it’s difficult to know which one is the most suitable. This stage of business is crucial, however, and it’s important to make the right funding choices.
How to finance a business
Business financing and funding options have expanded greatly in recent years and you’re no longer restricted to loans from the major banks. The alternative finance market offers funding solutions that you may not have considered before, and that are typically quick to obtain.
How to get a business loan
The right type of loan can kick-start your business or provide the financial support that enables growth. Not all business loans are made equal, however, and it’s important to know your options and how to source the best deals.
What is a debenture?
A debenture is a legal document used to define the terms of a secured business loan for a limited company or limited liability partnership. It includes the full amount of the loan, the interest rate and term, and the specifics of the lender’s rights to the asset mentioned.