Many construction companies are prevented from obtaining traditional bank and invoice finance due to the contractual nature of their work. Mention contracts to 99% of the the UKs based factoring and invoice discounting companies and they will run a mile.
Banks may provide overdraft facilities based on the strength of the business and the available security. Traditionally banks are secure overdraft borrowings against bricks and mortar. Therefore the size of any available facility is limited by the value of the available security. More often than not this is not enough for a construction finance to obtain adequate working capital.
The good news is that there are a couple of of bespoke funding facilities that provide funding against contractual debts. The products vary from funder to funder and the level of funding available depends on the nature of your business and the the contracts that you have in place. Funding can be approved on application rather than approved application depending upon the finance company involved. Some of the finance companies even have their own in house quantative surveyors to make sure that the amount of the application is realistic in terms of the work undertaken to date. The percentage of the prepayment will again vary depending on the nature of the business and the contracts. Whilst 80% funding is not realist on average funding between 50-60% of the outstanding debtor book is more realistic.
Tags: Construction Finance, Factoring
