Written by Rob Binns Updated on 20 April 2021 On this page Introduction to Construction Finance What is Construction Finance? The Best Construction Finance Companies in the UK Novuna Bibby Financial Services Nucleus Commercial Finance Paragon Aldermore Ultimate Finance SME Loans Case Study: Paragon and Cawarden Ask the Experts: The Importance of Cash Flow to Growth What are the Benefits of Construction Finance? Next Steps FAQs Expand Don’t miss out on new contracts because of poor cash flow. Browse our top 7 construction finance providers in the UK, and get fast, flexible funding for your next project – todayBest forMinimum annual turnover requiredFinance availableCash advance up toNovunaTransparent rates£50,000£10,000 to £500,00090%Bibby Financial ServicesFast payouts and flexible contractsNoneNot stated90%Nucleus Commercial FinanceFunding larger projects£1 million£100,000 to £50 millionNot statedParagonAsset financeNot statedNot statedNot statedAldermoreCustomer support£250,000Not stated70%Ultimate FinanceInvoice finance£600,000Up to £1.5 millionNot statedSME LoansSmall business financing£60,000Up to £500,00095% The people. The coffee breaks. The humour. There’s certainly a lot to love about being in the construction industry.Having to wait up to three months to be paid for a project, though, isn’t one of them. But for contractors and subcontractors, it’s a frustrating, yet all-too recognisable part of life. While wages, equipment hire fees, and job expenses all need to be paid now, you may not get the money you’re owed for months. We can’t make the construction industry any fairer. We can, however, recommend a few construction finance providers to help redress these imbalances. Offering fast, flexible funding and an intimate knowledge of what makes your business tick, the 7 construction finance companies below come with the finest pedigree.But what is construction finance, exactly, and how can it benefit you? And more importantly, which of our top 7 construction finance companies is best-suited to the specific requirements of your construction business?Let’s find out. What is construction finance?Construction finance is how contractors and subcontractors bridge those long waits for payment – for work that’s already complete, or still under construction.Construction finance is an umbrella term, encompassing the various kinds of funding available to businesses in the industry. On the one hand, it can come in the form of a fairly straightforward loan, which allows you to purchase the equipment, labour, or materials required to complete a job. This is called asset finance. Like any other loan, you’d pay this back over time (with added interest, of course).Alternatively, construction finance can be a form of invoice factoring. This popular form of funding involves a finance provider (they can be banks or independent companies) paying you a large chunk of your invoice’s value (sometimes up to 90%) upfront. In most cases, the finance provider also assumes responsibility for chasing your client for the debt.When your client eventually settles up, you’ll get the rest of what you’re owed – minus a fee for the initial funding.This form of invoice-based funding differs from other types of construction finance, such as secured or unsecured loans, or equipment leasing. With invoice factoring, you’re only borrowing money that’s already owed to you. There’s no collateral needed, and you won’t have to worry about how you’ll pay the loan back. Did You Know? Some other names for construction invoice factoring include construction bridging finance, construction factoring financing, and construction invoice-based lending. They all mean the same thing.Invoice finance is flexible, too. You can choose whether you want the finance provider to chase your client for payment (factoring), or keep that duty in-house (discounting). Oh, and it’s all done quickly, too – some finance providers pay out within 24 hours.Basically, you can wave goodbye to cash flow problems, or having to turn down projects due to lack of funds. Construction finance is your shortcut to scalability – so let’s find the right provider for your business. The best construction finance companies in the UK in 2021Taking into account fees, customer support, and accessibility, we scoured the market to name our top 7 UK construction finance providers for 2021.Our research indicates that the best construction finance comes from Novuna, Bibby Financial Services, Nucleus Commercial Finance, Paragon, Aldermore, Ultimate Finance, and SME Loans.The best construction finance providers are: 01 | Novuna 02 | Bibby Financial Services 03 | Nucleus Commercial Finance 04 | Paragon 05 | Aldermore 06 | Ultimate Finance 07 | SME Loans We should add that the providers appear here in no particular order. That’s because each one offers different eligibility criteria – some will require that you meet certain thresholds regarding annual turnover or invoice value, or have been in business for a certain amount of time. Compare construction finance quotes with usWe’re well aware that what works for one contractor won’t work for another – and that your own business is as distinct and unique as you are. That’s why we take all this into consideration when you compare construction finance quotes with us. Here’s how it works. First, we ask you to provide us with some information about your construction business’ requirements. We’ll need to know whether you’ve used factoring before, how long you’ve been in business, your turnover, and whether you serve businesses or customers.It takes just 30 seconds to provide us with this information, and we take the utmost care with your data. In fact, we use it for just one purpose – to get you the best, most personalised deals on construction finance. We match you with one or more handpicked invoice finance providers, who’ll be in touch with quotes tailored to your business’ needs. The service is completely free, too – you’ll just need to be based in the UK to be eligible. NovunaBest for transparent ratesMinimum turnover £50,000 (factoring), £250,000 (discounting)Release up to 90% of your invoice’s valueEstimated yearly costs start from £1,751Asset finance available from £10,000 to £500,000Asset finance APR representative is from 5.9% With both invoice and asset financing options available, Novuna is a versatile choice for funding your next big project. It also employs a refreshingly honest approach – even the hidden fees are clearly signposted, and its costs calculator lets you find out exactly what your repayments will look like over time. Customers say:“Extremely easy process. It was very easy to navigate through the application, and we were accepted in seconds. The funds were in my bank account within two working days. Very good, competitive rates. Would definitely recommend” – Kate, October 2020. Pros Offers repayment terms of up to five years Releases funds as quickly as within 24 hours of approval 6-month trial period available for its invoice finance product, followed by a rolling contract Outstanding customer reviews Cons You’ll need to pay a document fee of £175 and an up-front deposit before you receive funding on your asset Bibby Financial ServicesBest for flexible contracts and fast payoutsFunds released within 24 hours of invoice uploadRelease up to 90% of your invoice’s valueFlexible, 30-day rolling contracts availableNo minimum annual turnover required As specialists in construction finance, Bibby’s reputation – mirrored in its ‘Excellent’ Trustpilot rating – precedes it. With fast payouts, flexible contracts, and a seamless application process, Bibby’s invoice and asset finance empowers you to focus on what matters – the project! Bibby also partners with construction specialist Gateley Vinden to provide ancillary services, such as dispute resolution, contract reviews, and advisory support. Customers say:“After years factoring our invoices with HSBC, the pandemic forced us to choose an alternative. Luckily, Bibby came in and saved our business. From the day we decided to move to Bibby, the process was very easy to follow – Bibby was very quick and proactive getting us on board. The people at Bibby have been really helpful, and the online portal is very easy to navigate.” – Jessica, August 2020. Pros Intuitive, 24/7 online portal for managing your funding application's status Bad debt protection available Strong customer approval ratings across the board Cons One of the more expensive invoice finance services out there Little fee transparency Nucleus Commercial FinanceBest for funding larger projectsFor businesses with an annual turnover of at least £1 millionInvoice finance available from £100,000 to £50 million In its own words, Nucleus is “particularly suited to those needing £100,000 to £50 million funding”. So, while that rules out Nucleus for financing smaller jobs and assets, you can be sure it’s an ideal partner for the more ambitious projects on your business’ horizon. Customers say:“Working with Nucleus Commercial Finance has been one of the most enjoyable experiences. They know what they're talking about, know what is best for you, and are totally honest and transparent. Never at any point did I feel as if they were trying to scam or upsell me.” – Kris, January 2020. Pros Dedicated account manager included Confidential invoice discounting also an option Cons You’ll need to be turning over at least £1 million per year to be eligible ParagonBest for asset financeRelease up to 95% of your invoice’s valueNo minimum turnover specified Whether it’s a loading shovel loan or bulldozer bridging finance, Paragon’s asset finance facility specialises in connecting you to your next piece of equipment. Offering everything from asset refinancing and commercial loans to hire purchase and operating leases, you can be confident your business’ finances will remain firmly in your own hands. To dig deeper into how Paragon is helping Derby-based demolition merchant Cawarden take on bigger projects, explore our construction finance case study below.Customers say:“Paragon is easy to deal with as their team likes to meet customers face-to-face, which is important to us – and to the agricultural sector as a whole. “We appreciate the direct contact we have with [Paragon Business Development Manager Ian Smith]. He sorts all the information he needs directly with our accountant on our behalf, and takes the hassle out of the situation for us.” – Thomas, June 2020. Pros Bad debt protection available Simple fee structure, with no hidden fees Cons Poor customer reviews online You're almost finished with our list of the top 7 best construction finance providers in the UK. Time to start comparing quotes?Simply hit one of the buttons below to start our quick questionnaire. It takes just 30 seconds to do, and by telling us more about your construction business’ specific requirements, we can help ensure that you receive the best, most personalised rates on funding. Compare Tailored Construction Finance Quotes With Us Do you already use construction finance? Yes No Our form is free, and takes less than a minute to complete... AldermoreBest for customer supportRelease up to 70% of your invoice’s valueFor businesses with an annual turnover of at least £250,000 Aldermore’s no frills, no nonsense construction finance doesn’t exactly hog the headlines. But, with a transparent fee structure (if not exact rates), a dedicated relationship manager, and quality customer support, it’s a reliable funding option for businesses with sufficient turnover. Customers say:“I cannot speak highly enough about Aldermore’s service on the telephone. It takes a while to get through due to high demand, but when you do, the operators are excellent. They’re helpful, friendly, and in our case went the extra mile to sort things out.” – Stephen, September 2020. Pros Bad debt protection available Confidential facility provided Plenty of support and informational resources are offered through Aldermore’s website Cons Its 70% cash advance is lower than those offered by other construction finance providers listed here Ultimate FinanceBest for invoice financeFor businesses with an annual turnover of at least £600,000Access up to £1.5 million in confidential invoice finance Got at least £600,000 in annual turnover? Looking to release large amounts of funds to free up cash flow? Ultimate Finance is for you. Sure, it’s like Nucleus in that it’s not suitable for smaller jobs, or financing minor assets. Rather, Ultimate Finance is better-suited to the larger projects – the ones that are going to make you money, and get you noticed. Customers say:“Ultimate Finance is a fantastic company which always goes the extra mile. We receive a professional, friendly service, and Ultimate Finance keeps us informed every step of the way. “We mainly use the Asset Finance and Invoice Finance products – both of which have been developed into customer-friendly offerings, which suit our business. I would recommend Ultimate Finance without hesitation.” – Chris, October 2020. Pros Excellent customer reviews Decent phone support Funds are promised within one week, which is fast... Cons …but not quite as rapid as the 24 hours promised by several of the other providers featured here Setup and service fees apply SME LoansBest for small construction business financingRelease up to 95% of your invoice’s valueFor businesses with an annual turnover of at least £60,000Access up to £500,000 in fundsGet matched with a construction finance provider that meets your needs If you’ve researched several banks and independent construction providers and found they’re just not for you, don’t despair – there is another way to do things. It’s called using a credit broker, and SME Loans is one of them. Simply provide SME Loans with a few details about your business, and they’ll match you with finance providers who fit your requirements. Customers say:“I wasn't aware of SME Loans before, but I’m so glad I found them. Applying for finance really does take just five minutes! The lender was easy to work with, and I got a great deal.” – Michael, October 2020. Pros Flexible repayment terms, from one to five years Funds released within 24 hours Lend at a pre-agreed interest rate Cons SME Loans is a broker, meaning it doesn’t provide you with the funding directly No reviews available online… should we be suspicious? Case study: how Cawarden uses construction finance to scaleLeicester Royal Infirmary. Derby County FC’s Baseball Ground. We hope you weren’t too attached to the previous incarnations of these popular British buildings – Midlands-based demolition firm Cawarden took care of them both, in order to make way for bigger, better varieties. But would it all have been possible without construction finance?Owner William Crooks used Paragon’s asset financing service to upgrade key elements of his machinery. With funding, Crooks was able to trade his old excavators up to mobile crushers and attachments. In his own words:“What is important to me is that Paragon doesn’t just know about the finance, but understands the business I am in – and the machinery too. Whenever I do a deal through Paragon, I know I will get a good quality service. If there is a problem, the team is just a phone call away.”Another deal saw Cawarden fund a range of new equipment necessary to get a project over the line – in this case, the destruction of an old bottling plant in Burton-upon-Trent. By purchasing a new Komatsu hydraulic excavator (a best-in-class machine that can easily change from a bucket to a shear, thus boosting productivity), Crooks and his team were able to work smarter, rather than harder.“Everything is made so easy, and I trust Paragon to get the job done.” Compare Tailored Construction Finance Quotes With Us Do you already use construction finance? Yes No Our form is free, and takes less than a minute to complete... Ask The Experts How important is cash flow to a construction business’ growth? We spoke exclusively to Jakub Safarcik, founder and director at Lansac Ltd, about how construction businesses can plan and prepare financially for growth, while avoiding cash flow woes.His tips are below.Firstly, make sure you have a good accountant. The construction business is tough, and relies heavily on having successful cash flow at all times. This can be a challenge for any small business to deliver, so it’s important to develop cash reserves where possible, and ensure your business is financially efficient. Remember that a £2 million project will require around £200,000 upfront, and bear in mind that for every project you take on, you’ll probably need two months’ worth of money to cover the first month. Banks don’t look favourably at businesses with short histories, unaudited accounts, or poor cash flow for the project they're trying to win. One good solution can be to have an honest chat with your client to agree on early valuation and fast payment.Sites do not progress without cash flow. Money equals materials, and without materials, no construction or refurbishment can continue. Delays are financially costly for all involved. They can also damage your reputation, which in itself may inhibit potential business growth. Building cash reserves can be a huge challenge, so develop good relationships with trustworthy suppliers and subcontractors, who can give credit where needed. Prove your worth to these subcontractors and develop clear, open communication. Helping your sub-contractors to grow with you can support the development of these close, trusted relationships. As you move onto bigger projects, help suppliers and subcontractors to get the right health and safety protocols, management systems, and accounting in place, so that you can work together safely and effectively.Vet your clients and check for warning signs. Credit checks for any new future client should be the minimum. Many developers are using development loans to cover the construction process. If that is the case, get details of the lender’s surveyors, and make sure that you’re on site when they visit to answer any of their questions there and then. Although this might be a slightly awkward situation with a potential client, you need to know how the project is financed, and that there are sufficient funds for its completion – including any contingency.Jakub has over ten years of experience running construction projects in the UK. He’s a member of the Chartered Institute of Building. What are the Benefits of Construction Finance? Did You Know? COVID-19 saw the UK’s construction businesses record their worst collective slump in 23 years. The construction activity index plummeted from 39.3 in March 2020 to just 8.2 in April – its lowest since the figures were first collected in March 1997.However, it's not all doom and gloom. Data from the Office for National Statistics (ONS) states that construction output in November 2020 is higher than it was in February 2020, up by a total of 0.9%. This was down to a 7.4% increase in repair and maintenance work, which easily off-set the 3.1% drop off of new work since the pandemic started.Pandemic or no pandemic, contractors and subcontractors have always had to put up with the uncertainties of the construction industry. It’s a relief, then, that construction finance mitigates many of the industry’s sharper edges – and that this finance is still available to support businesses operating during COVID-19.Here are just a few of the ways that construction finance can benefit your team and projects:✓ It frees up cash flowThis one’s a biggie. Cash flow is thought to be the main reason that the failure rate of the UK’s construction businesses is so high – and continues to soar. Businesses are going bust not because they can’t find work, or because they’re bad builders. They’re failing because they can’t afford to take on new work – because they simply don’t have the cash to spare. To demonstrate how important cash flow is in the lifecycle of a construction business, let’s take a look at two contrasting timelines. Only one of the businesses below uses construction finance. Which one do you want to be?See what we mean?Construction finance is so vital because it allows you to delay or spread out the significant outlay associated with buying new tools or equipment. You can pay your wages and suppliers without delay, and accept new jobs without stress.Plus, with almost immediate funding available against your accounts receivable, you won’t have to brave those long, lonely waits for payment.✓ Bad debt protectionIf it’s not cash flow that’s killing the UK’s construction businesses, you can bet it’s bad debt. Your business might even have first hand experience of it – clients going bust when they owe you money for work, and ultimately being unable to pay.It’s not fun – but there is a way around it.As you’ll have seen above, many construction finance suppliers offer bad debt protection. It’s a premium, add-on service – and as such comes at an extra cost – but if your clients have a less-than-stellar credit history (or previous insolvencies to their names), it’ll definitely be worth the money.Bad debt protection essentially absolves you of the liability you face for money owed to you by a client, should that client become insolvent. Instead, the construction finance company funding your invoices takes this on – meaning you won’t be out of pocket, even if your clients are.✓ It’s a short-term optionTaking out a hefty loan from the bank often seems like a good idea at the time. But these debts can stretch on forever – gathering not dust but interest, and ultimately forcing your business into a whirlpool of debt.Construction finance – particularly that which is tied to your invoices, and thus money already owed to you – helps you avoid that crippling cycle of debt. You’ll receive funding immediately, and – because most of the UK's top invoice financing companies collect payment on the invoice for you – the debt’s over as soon as your client gets around to paying up. It’s a solution geared towards the short-term – to helping you get cash when you need it, without all the strings attached. Next stepsWe’ve said it before, and we’ll say it again. There’s no one size fits all construction finance solution for UK businesses.Some contractors will require asset finance only – a small loan to purchase some new tools, or upgrade some tired equipment for a big job. On the other hand, some contractors will prefer an option that looks more like invoice finance – a quick cash injection to bridge those long waits for payments, and free up funds for immediate expenses, such as wage payments.Other businesses will no doubt require a blend of the two construction finance options above – a more flexible, hybrid funding option that blends straightforward construction loans with ongoing, invoice-based finance.Ultimately, the construction finance package that’s right for you will reflect the unique qualities and needs of the business you’ve built. We know this – and it’s why, when you decide to compare quotes with us, we take into account your own business’ specific needs and requirements.So why not take advantage of our free quote-finding service? Here’s how it works:1) First, provide us with some information about your requirements. We’ll ask:Whether you’ve used invoice finance beforeWhat industry you’re in (although, since you’re here, we already have a pretty good idea)How long you’ve been trading forWhat type of customers you have (are they mainly businesses, or individuals?)What your expected annual turnover is this year2) Knowing all of the above allows us to match you with one or more construction finance providers that meet your needs. And no, that’s not any old supplier that takes our fancy. We pair you up only with companies that are the right fit for the requirements you’ve specified.3) Newly armed with these details, one or more construction finance providers will be in touch with you directly, to offer tailored quotes – so keep your phone at hand. Hit one of the buttons below to start our questionnaire. Compare Tailored Construction Finance Quotes With Us Do you already use construction finance? Yes No Our form is free, and takes less than a minute to complete... FAQsYour questions, answered: 01 | What affects my business’ eligibility for construction finance? 02 | How much does construction finance cost? 03 | Do I have to finance my entire sales ledger? 04 | Why can’t my construction business just get funding from the bank? What affects my business’ eligibility for construction finance?Sadly, construction finance won’t be the right option for – or even accessible to – all businesses in the industry.As is the case when you take out a business loan, construction finance providers will underwrite you, to ensure you’re not a credit risk. This involves assessing your:Credit score and historyNumber of debtorsTurnoverThe total value of the invoices you’re seeking finance forThe amount of time you’ve been in businessBecause invoice-based finance is leveraged on how much you’re owed, lenders will typically also take the creditworthiness of your customers into account, too. After all, they’re the ones you (and ultimately, the lender) will be chasing for payment.To be eligible for construction finance, you’ll also need a current CIS UTR number, and be the main contractor or subcontractor on the job. How much does construction finance cost?Typically, construction finance will involve the following fees:Service charge: a small percentage of your overall turnoverDiscount charge: the interest rate you’ll pay on what you borrowAnnual fee: a small percentage of the finance facility limitWhat you’ll pay for construction finance will always be tied to your eligibility criteria, and your business’ unique situation and requirements. This means that your full fee package will be affected by your business’ turnover, creditworthiness, and size – not to mention the value of your ledger. Do I have to finance my entire sales ledger?While this depends, to an extent, on the lender, most invoice factoring deals do require you to finance your entire ledger.For a more flexible way of financing your next project or asset, you can try selective invoice finance – it’s essentially factoring, but with more choice over which invoices you’d like funding for. Selective invoice finance (also known as single invoice discounting) is usually a more expensive service. Why can’t my construction business just get funding from the bank?Often, the issue isn’t that banks aren’t willing to lend to you (though their strict underwriting processes mean that often they won’t). Rather, the problem with a bank loan is that banks typically aren’t willing to fork out for the full cost of the project at once. Banks usually only provide finance in stages as work progresses, or after it’s complete and has been re-mortgaged. When you need cash now – for vital materials, labour, and sub-contractors – staged payments just aren’t workable.Plus, bank loans come with another caveat – that they’ll likely ask you to secure the loan with collateral. This could mean putting not only your business’ prized assets on the line, but risking your personal property, too.When you select invoice finance, funds are typically available within 24 hours – mitigating the cash flow woes that come with bank loans. And, because the funding is only tied to money you’re already expecting, you won’t have to stump up any collateral, either. Expert Market is a trading name of Marketing VF Limited, which is an appointed representative of Resolution Compliance Limited (FRN: 574048) ) which is authorised and regulated by the Financial Conduct Authority. Marketing VF Limited is registered in England and Wales. Company number: 06951544. Registered office: Imperial Works, Block C, Perren Street, London, NW5 3ED, United Kingdom.Our complaints policyIf you feel dissatisfied with any aspect of our service, then in the first instance please contact email@example.com. We will immediately carry out an investigation of your complaint and we will provide a written response.If we cannot resolve your complaint within three business days, we will refer your complaint to our principal firm, Resolution Compliance Limited, to complete an independent investigation and communicate the outcome to you.If we are unable to resolve your complaint to your satisfaction and you are an eligible complainant as defined by the Financial Conduct Authority, you will have recourse to the Financial Ombudsman Service. Details of the Financial Ombudsman Service are:The Financial Ombudsman ServiceExchange TowerLondon E14 9SRcomplaint.firstname.lastname@example.org+44 (0) 20 7964 1000 (switchboard)+44 (0)20 7964 1001 (main fax)0800 023 4 567 – Calls to this number are now free on mobile phones and landlines0300 123 9 123 – Calls to this number cost no more than calls to 01 and 02 numbers Rob Binns Senior Writer Rob writes mainly about the payments industry, but also brings to the table industry-specific knowledge of CRM software, business loans, fulfilment, and invoice finance. When not exasperating his editor with bad puns, he can be found relaxing in a sunny (socially-distanced) corner, with a beer and a battered copy of Dostoevsky.