Here’s how this method of funding usually operates:
You raise your invoice or application for payment and send it to your customer.
At the same time, you also send the invoice or application to your funding provider. This is usually by upload via their portal.
The agreed percentage of your invoice or application is deposited into your bank account, usually within 24 hours.
Your customer pays their invoice or the application. This may be managed through your finance provider, who collects discreetly.
You receive the balance of any amount outstanding, minus the fee agreed with the provider.
The operational details for construction finance will vary between lenders. Many have an online system that allows you to monitor your finance balance at any time. From raising your invoice to the swift deposit of the agreed percentage into your account, the process is designed for efficiency. This structured framework ensures not only timely access to working capital but also streamlines the financial flow, allowing you to concentrate on the core of your construction projects without the burden of financial uncertainties.
Why is Construction Finance Necessary?
Construction companies usually give credit to their customers, meaning there is typically a 30-day delay between raising the invoice or request for payment and actually getting paid. During these 30 days the construction company will have its own bills to pay, and staff to pay - either weekly or monthly, or both.
However, in reality most customers take longer than 30 days to pay. The median average, according to Construction News (January 2021) is 41 days across the UK’s 100 largest contractors. Some customers take twice as long as that - more than 80 days - before they pay.
Construction finance exists because of this huge gap between requesting the cash and getting paid. Few businesses in the industry have the cash reserves to bridge this gap by themselves. Construction finance is a commonly used method for raising working capital.
Benefits of Construction Finance
The advantages of construction finance extend beyond mere financial support; it becomes the backbone sustaining payments for materials, equipment, and skilled labour. In the fast-paced construction landscape, maintaining project schedules and meeting targets is owed to the flexibility and effectiveness of construction finance. For businesses seeking not just survival but growth, construction finance proves to be an invaluable ally, providing stability and a strategic edge.
The advantages on offer from construction finance include:
Allows you to keep paying for materials, equipment hire and staff.
Helps you to stay on schedule and meet targets.
Useful for businesses needing working capital to grow.
We Help Businesses Secure Construction Finance
Navigating the complexities of construction finance requires more than a mere understanding of financial systems; it requires a knowledgeable guide. Our team work with a vast range of finance providers well-versed in the nuanced challenges of the construction industry. Whether your business requires an immediate working capital or anticipates future financial needs, our experienced finance professionals are committed to finding the most cost-effective and timely solutions tailored to your circumstances.
Disclaimer: JD Capital Finance (Registered office -First Floor, Steeple House, Church Lane, Chelmsford, England, CM1 1NH, Registered Number 10128297) helps UK firms access business finance, working directly with businesses and their trusted advisors. We are a credit broker and do not provide loans ourselves. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. JD Capital Finance can introduce applicants to a number of providers based on the applicants’ circumstances and creditworthiness. JD Capital Finance may receive a commission or finder’s fee for effecting such introductions.