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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.
Invoice finance
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 can company finance be used for?
Business finance can be used for a multitude of purposes within a company, from boosting general cash flow to funding development projects and buying stock. Its flexibility and adaptability to an individual business’s needs make it ideal whatever stage of business you’re at.
Management buy-in financing options
If you’re considering being part of a management buy-in (MBI) or you’ve decided to sell your own business to an incoming management team, there are several ways in which the transaction can be financed.
Can I get business finance if my company is insolvent?
If your company is insolvent, it’s vital to stop trading straight away and obtain assistance from a licensed insolvency practitioner. The insolvency practitioner’s role at this point is to assess your company’s financial situation so that they can provide guidance on whether additional finance is appropriate.
Can’t pay company bridging loan – what are my options?
A bridging loan is a form of short-term finance that lasts for up to 12 months. It provides vital funding between transactions when a company purchases one property before the sale of another has been completed.