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What funding options are available for construction companies?

PUBLISHED ON: 16/08/2023

How can I raise finance for my construction business?

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?

Financing for construction companies

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.

How to access funding for construction companies

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.

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