Say goodbye to the three month payment term and access your cash fast, using a construction finance company to bridge the gap
There are plenty of things to like about the construction industry, but long payment terms (often up to three months) for large sums of money isn’t one of them. Forking out for costly but essential machinery isn’t exactly enjoyable, either.
Naturally, it’s the smaller construction companies which will feel the effects of these cash flow restrictions the most. That’s why more and more construction companies are seeking out construction financing options to bridge these gaps, enabling them to gain instant access to their cash and carry on with business as usual.
But what exactly is construction financing?
Construction financing comes in two main forms: invoice factoring, and asset financing.
With invoice factoring, an invoice factoring company pays your pending invoices upfront, and takes a small cut in return. Asset financing is a simple loan taken to cover the costs of a new piece of equipment, which is repaid over a pre-agreed timeframe (with added interest).
Several companies offer both of these service in the UK, and we’ve compared rates and reviews to find the best in the business:
Best construction finance companies
The best construction finance companies are: Hitachi Capital, Touch Financial Support, Funding Options and Bibby Financial Services.
|Hitachi Capital||Best for high-value asset financing||Read Review|
|Touch Financial Support||Best for finding tailored solutions||Read Review|
|Funding Options||Best for customer satisfaction||Read Review|
|Bibby Financial Services||Best for construction finance experience||Read Review|
1. Hitachi Capital
Best for high-value asset financing
Hitachi Capital has been providing asset financing to construction companies for over 35 years. Hitachi offers loans to the value of £5,000 to £500,000, with repayment terms from two to five years. The company can typically pay asset suppliers within 24 hours of receiving the paperwork.
2. Touch Financial Support
Best for debt collection
Touch Financial works with a number of financing companies to source the best deal for your specific situation. Whether you’re after asset financing, invoice factoring or both, you’re guaranteed complete confidentiality. Touch Financial can also match you with a lender who can take on responsibility for collecting outstanding debts on your behalf. You’ll also benefit from ‘Bad Debt Protection’, meaning you’ll get your cash even if your customer goes insolvent.
3. Funding Options
Best for customer satisfaction
Funding Options knows that the financing that works best for one company might not be the best option for another. That’s why it works with over 50 trusted lenders to make sure they find the best fit for each company. With an incredible Trustpilot score of 9.6/10, with 367/401 customers rating them ‘Excellent’, it’s clear that Funding Options is providing a useful and trustworthy service.
4. Bibby Financial Services
Best for construction finance experience
Bibby is a major construction finance provider, and has been specialising in the industry since 2004. Bibby offers a number of great benefits, including confidentiality and ‘Bad Debt Protection’ as standard, as well as the ability to access your cash within 24 hours of uploading customer billing into the online system. In 2016, Bibby “funded £661 million of construction billing, protected £190 million of construction debt… and helped to save their construction clients over £860,000 with their Foreign Exchange Service”. Impressive stuff!
1. What are the benefits of construction finance?
In case you weren’t already sold on construction finance options, here’s a summary of the key benefits:
- It’s quick – most lenders give you access to cash within 24 hours of uploading a copy of your invoice.
- It helps you grow – take on new jobs with the confidence that you have the cash available to sustain you.
- It’s confidential – none of your suppliers or clients will find out that you’re using construction finance if you don’t want them to.
- It’s safer – most suppliers include ‘Bad Debt Protection’ as part of their invoice factoring offer, meaning you still get your money even if your customer goes under.
2. How much does construction finance cost?
Invoice factoring for construction
The cost of invoice factoring for construction will depend on many factors, including the size of your company, the amount of money you’re reclaiming, and the extent to which you pass over the ‘risk’ of the debt to the construction finance company.
Typically, the price of invoice factoring for construction will look something like this*:
- Service charge (a small percentage of your turnover, e.g. 0.5%)
- Discount charge (percentage over the Bank of England base rate, e.g. 3%)
- Annual fee (a small percentage of the facility limit, e.g. 0.5%)
* figures courtesy of Funding Options
As you’d expect, these rates also vary from company to company, with some better suited to larger businesses and some to smaller. Find the best deal for your business by popping a few details into this short webform, and we’ll provide you with quotes from the top suppliers for your requirements.
The cost involved in taking out a loan for asset financing will vary greatly depending on the amount you’re borrowing, your credit rating, and the length of time over which you’ll be repaying the loan. Again, costs will also vary from one financing company to another; your best bet is to request quotes from leading providers and go from there.