This is one of the least known about finance facilities in the market place. It is a very simple form of funding but is often overlooked when businesses consider their financing options. Although it is a form of cashflow funding it is completely different from factoring and invoice discounting which provides cash against unpaid invoices for periods of up to 90 days.
Contract Finance provides a lump of cash up front against the future value of guaranteed contracts. For example a business may have a guaranteed contract over a five year period generating £10k of income per month. The total value of the contract is therefore worth £500k
It is possible to provide funding of up to £500k less a charge for borrowing the money over a five year period. The finance company will take a legal charge over the contract and other legal documentation to make their security water tight. There are few funders in the market but still enough to provide funding against a large number of scenarios.
A minimum deal size is £50k and potentially no upper limit. The strongerthe covenant of contract the greater the percentage advance. This facility works very well where the contract is with a government body such as an NHS Trust. Each particular deal will be assessed on it own merits and if a business has any guaranteed future value it is always worth a chat.
Tags: contract finance
