Financial challenges for construction businesses

March 5, 2024

The nature of the construction business opens up a host of potential financial challenges. Projects demand investment in materials, equipment and people, while the payment cycles can be slow and lumpy - cash is often received and paid out in single, large amounts.


The good news is that many funding solutions for construction businesses are available to help with these challenges. These allow many construction firms to deliver successful projects while keeping their costs and their cashflow under control.

Late payments from contractors

It’s not unusual to be kept waiting for 60, 90 or even 120 days before you get paid. That’s a long time when you have people to pay, materials to purchase, equipment to buy or hire, and tax bills to settle. 


Late payment is a real problem for small and medium-sized businesses in the construction sector, and despite attempts to discourage the practice, it’s not going away.


Hoping that your customer will pay in time for you to meet your own payment obligations isn’t a strategy for success. It’s better to have a plan and a solution in place that you know will enable you to make payments even before you’ve received the cash you’re due.


Invoice finance, or invoice factoring, is a popular and effective way to break out of the late payment trap. You can choose to get paid within a day of raising the invoice, allowing you to plan your cashflow much more effectively.

Funding new construction equipment

Getting essential plant and equipment onsite means making what are usually significant financial commitments, whether you’re buying new or second hand. Getting the right funding mechanism in place can be a major challenge for construction companies.


Often the supplier will offer lease or hire purchase solutions, particularly when you’re buying new. This can be trickier to arrange when purchasing used equipment.


With plant and equipment often costing thousands, if not tens of thousands, of pounds, you want to be sure of taking the most cost-effective approach to funding, which gives you the flexibility you need should circumstances change.


To make these purchases, construction firms can access various different types of asset finance. Leases, hire purchase or other asset finance solutions allow you to fund these major purchases in a way that makes it easier to manage cashflow and plan for business growth.

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Paying workers on time, every time

Every one of your team needs to be paid what they’re due, on time, every time. With skilled construction labour in short supply, you don’t want to run the risk of losing key people because of late payment issues.


Even when your own customers are paying on time, the nature of construction project payment cycles means paying the payroll and sub-contractors can be a significant challenge. The work needs to be done and usually paid for before the customer settles up.   


Short-term loans and invoice finance can be a real help in these situations. They give you the cash you need to pay your team. Knowing you have a solution in place spares you the last-minute stress that some firms struggle with when the payroll is due.

Growing your business

A less obvious, but very significant, financial challenge for construction businesses is how to fund growth. If you want your firm to thrive and grow, it needs investment. You need a plan that will help take you from where you are now to where you want to be.


Unfortunately, the other financial challenges such as paying your team, funding equipment and managing day-to-day cashflow, can be distractions from growth planning. If growth is important to you, it will always be harder when you’re more focused on the urgent.


It pays to take the time to consider your longer-term funding solutions.

How we help construction businesses find funding

Whatever your financial challenge is right now, be it late payments or funding the purchase of plant and equipment, we can help. Our team has worked with many construction business owners who are looking for the right finance for their situation.


If you want to explore your options for raising funds for your construction business, get in touch with us today.

Jamie Davies
Managing Director

As a founder of multiple businesses, Jamie believes that mindset, discipline and ambition are key drivers for success, both for his businesses and for his clients. 

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Disclaimer: Spark Finance Ltd (Registered office - 18 John Stow House, London, England, EC3A 7JB, Registered Number 10128297) helps UK firms access business finance. Spark is a credit broker, not a lender. Any quotes provided are for information purposes only and subject to status and separate lender terms and conditions. Applicants must be aged 18 and over.  Guarantees and Indemnities may be required.  Spark Finance may receive commission from lenders.  Spark Finance Ltd is authorised and regulated by the Financial Conduct Authority in the UK (FRN 958123).
© Spark Finance Ltd is authorised and regulated by the Financial Conduct Authority (FCA) in the UK. Their reference number is 958123, and you can use that to find them on the FCA register.