Last updated: September 20th, 2026
In this article we are going to explore ‘Construction Finance For UK Companies’.
There are potentially a large number of finance options for construction companies. Even if your bank has turned you down, it doesn’t mean you cannot get the funding you need.
Written by Marcus Wright, owner and founder of Bolton Business Finance Ltd, in financial services since 2008 and a commercial finance broker since 2019. Last reviewed September 2026.
Two different things share this name. In the invoice finance market, construction finance means a facility that funds applications for payment and uncertified work on live contracts, which is what this page covers. If you are looking to fund the build of a property scheme from land purchase through to completion, that is development finance and works completely differently.
Construction Finance
If you are involved in the construction industry, there are many reasons why you might need additional finance to grow your business. From buying new equipment, keeping sub-contractors and suppliers happy, to funding projects on 30-60 day payment terms. Construction can be a very capital intensive industry.
Luckily there are various solutions to funding businesses in the construction industry. Depending on what the finance is for and also the individual circumstances of the business, will dictate what finance options are available to you.
Types of Finance Available For Construction Companies UK:
- Construction Business Loan
- Construction Invoice Finance
- Construction Factoring
- Construction Equipment Finance
Keep reading below, as we discuss each option in detail.
If you would like to speak to an independent construction finance expert, then please call 0161 546 9128 or fill in a contact form here.
Why Construction Is Funded Differently To Every Other Sector
Most invoice finance works on a simple pattern. You deliver, you invoice, the funder advances against that invoice. Construction breaks that pattern, and understanding why explains almost everything about how the sector gets funded and why so many lenders will not touch it.
You do not raise an invoice, you make an application for payment
On most construction contracts, including the standard JCT and NEC forms, you do not invoice on completion. You submit a valuation of the work done in that period, called an application for payment, and the employer or main contractor assesses it. They can certify it in full, certify less than you applied for, or issue a pay less notice.
That creates a gap a normal invoice does not have. At the point you apply, the amount is not yet agreed. A standard invoice finance facility advances against a fixed, agreed sum. A construction facility has to be willing to advance against a number that might still come down.
This is why funders talk about certified and uncertified applications. Once an application has been certified, it behaves much more like an ordinary invoice and attracts a higher advance rate. Uncertified applications carry more risk for the funder and are advanced at a lower percentage, if at all.
Retention
Most construction contracts hold back a retention, commonly 3% or 5% of the value of the work. Half is typically released at practical completion and the remaining half at the end of the defects liability period, often twelve months later.
Funders almost never advance against retention, because it is not due yet and may be reduced by remedial work. If you are running at 5% retention on a £1m turnover, that is £50,000 of your money sitting in someone else’s bank account, and no facility will treat it as fundable. It is worth knowing that going in rather than being surprised by it.
Contra charges and set-off
Main contractors routinely deduct from subcontractor payments for things like plant hire, welfare facilities, attendance, or making good defective work. These are contra charges, and they reduce what actually gets paid against an application.
For a funder that has already advanced money, a contra charge is a shortfall. This is the single biggest reason mainstream invoice finance companies decline construction, and it is why specialist funders price the sector higher and look closely at your contract terms and your history with each main contractor.
The Construction Act sits behind all of it
Payment on most UK construction contracts is governed by the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009, usually just called the Construction Act.
Among other things it requires contracts to have a proper mechanism for working out what is due and when, restricts pay when paid clauses, requires a payment notice and any pay less notice to be given within set periods, gives a right to suspend performance for non-payment, and gives either party the right to refer a dispute to adjudication at any time.
Funders care about this because those rights are part of the security. A facility is easier to arrange where the contract is a recognisable standard form with a clear payment mechanism than where it is a one-off bespoke contract with unusual payment terms.
CIS
Under the Construction Industry Scheme, contractors deduct tax from the labour element of payments to subcontractors before paying them. The standard deduction is 20% for subcontractors registered with HMRC and 30% for those who are not. Subcontractors with gross payment status are paid in full with no deduction. Materials are excluded from the calculation.
This affects funding because the cash actually landing against an application is net of CIS, so a facility has to be set up to account for it. Gross payment status materially improves cash flow, and our CIS gross payment status eligibility checker will tell you whether you are likely to qualify.
Types of Finance For Construction Companies
There are different types of finance available depending on what you need the money for and your individual circumstances. If you are unsure which is right for your business, speak to a professional Commercial Finance Broker to discuss your options.
If you have been turned down by your main bank, there are still many specialist lending houses that work with contractors and building companies.
Certain types of finance are suitable for new start ups and even those with bad credit.
Lets look at each option one by one and see what they can be used for and likely eligibility criteria.
Construction Business Loan
If your company has a good track record and directors have good personal credit, then a Business Loan may be available. In order to apply you will need to demonstrate affordability of the monthly payment. This is usually assessed by lenders by looking at bank statements and recent financial accounts.
Not all business loan providers will lend to the construction sector, so you need to check this prior to applying.
Suitable for:
- Companies with 2-3 years submitted annual accounts
- Directors with good personal credit
- At least one director is a homeowner
- Profitable and positive net worth
Invoice Finance For Construction
Invoice finance allows you to release money tied up in unpaid invoices and applications for payment. If you work B2B either as a sub contractor or main contractor then invoice finance may be suitable for you. It is not suitable for homeowner or consumer contracts, only business to business.
There are different types of invoice finance. The main two variants being Invoice Factoring and Invoice Discounting. The main difference is that factoring usually includes credit control and is disclosed to your customers. Whereas discounting is usually confidential and does not include credit control.
You can read about the full differences in the article: ‘Invoice Discounting vs Factoring’
Suitable for:
- Regular debtor balance
- Trade B2B
- Grant credit to customers
- Work In progress and applications for payment
Factoring For Construction Industry
As discussed above Factoring is a type of invoice finance. However not all invoice finance companies will offer factoring to companies that work in the UK construction industry.
This is due to a number of things such as high insolvency rate, contractual obligations and non standard invoicing (applications for payments and retentions).
However there are a number of specialist factoring lenders that work in the sector. This may sometimes be referred to as ‘Construction Factoring or Construction Finance’.
As well as releasing up to 90% of outstanding invoices, it may also be possible to access funding against unverified applications for payment.
Suitable for:
- Trade B2B and grant credit terms
- New start ups accepted
- Bad credit considered (including CCJ’s)
Its important you speak with the correct funders that understand your sector.
Get in touch by filling in the form below and we can source construction finance and factoring for you.
Construction Equipment Asset Finance
If you are looking to purchase assets like equipment and machinery, then you may be able to spread the cost over 2-5 years. Usually a small deposit is required of approximately 10% or higher of the purchase cost.
This could be for any type of ‘Hard’ asset purchase, such as cement mixers, cherry pickers, excavators and fork lift trucks.
Most asset finance lenders will require at least 1 year trading history to demonstrate affordability and a track record. Start ups may be able to secure equipment and asset finance if the director is of a good personal credit standing. Although a larger deposit may be required.
Suitable for:
- Companies with 1-2 years submitted annual accounts
- Directors with good personal credit
- Profitable and positive net worth
- Deposit available (10%+)
If you already own plant and machinery outright, asset refinance raises a lump sum against it. That is worth considering alongside a construction finance facility rather than instead of it, because the two are secured on different things and sit alongside each other without conflict.
What A Construction Finance Facility Actually Looks Like
| Feature | Standard invoice finance | Construction finance |
|---|---|---|
| What is funded | Issued invoices for completed work | Applications for payment, certified and sometimes uncertified |
| Advance rate | 85% to 90% | Often 60% to 70%, higher once certified |
| Retention | Not applicable | Not funded |
| Verification | Light touch or none | Contract review, main contractor checks, site visits |
| Pricing | General SME book | Above general SME book, reflecting contra and dispute risk |
| Panel available | Most funders | A minority, specialists only |
The lower advance rate is the thing most people react to. It is worth putting it in context: 60% of an application you could not otherwise draw against at all is more cash than 90% of an invoice you are not able to raise until the job finishes.
A Worked Example
A groundworks subcontractor turning over £1.2m a year, working for three main contractors on JCT contracts with 5% retention and applications submitted monthly.
| Item | Figure |
|---|---|
| Monthly applications for payment | £100,000 |
| Less 5% retention, not fundable | £5,000 |
| Fundable value | £95,000 |
| Advance at 65% | £61,750 |
| Service fee at 2% of turnover | £2,000 |
| Discount fee, base plus 3.5% on £61,750 for 45 days | £552 |
| Total monthly cost | £2,552 |
The discount fee is calculated on the Bank of England base rate, 3.75% as at September 2026, plus a margin, and charged only for the days the money is drawn. The 45 day assumption reflects the gap between applying and being paid on a typical construction contract, which is longer than the 30 days most sectors work to.
Figures are illustrative only. Construction pricing varies more than any other sector because it depends heavily on who your main contractors are, what contracts you work under and your history of contra charges and disputes.
What A Construction Funder Will Ask For
- A list of your main contractors and what proportion of turnover each represents
- Copies of the contracts you work under, or at least the payment terms
- Your current applications and their status, certified or awaiting certification
- Retention held, by contract
- History of contra charges and any live disputes or adjudications
- Recent management accounts and an aged debtor report
- Your CIS position, including whether you hold gross payment status
An honest answer on contras and disputes is better than a clean one. Funders in this sector expect to see some, and a business claiming none at all usually gets more scrutiny, not less.
Construction Finance FAQ
What is construction finance?
In the invoice finance market, construction finance is a facility that advances cash against applications for payment on live construction contracts, rather than against completed invoices. It is a specialist form of invoice finance built around how construction contracts actually pay, including certification, retention and contra charges. The same phrase is sometimes used loosely to mean development finance, which funds the build of a property scheme and is a different product entirely.
Can you fund an application for payment before it is certified?
Some specialist funders will, at a lower advance rate, because the amount is not yet agreed and could be reduced. Once an application is certified it behaves much more like a normal invoice and attracts a higher advance. Not every funder in the sector will touch uncertified applications, so it is worth establishing that at the outset.
Can I get construction finance with retention held?
Yes, but the retention itself is not funded. The facility advances against the value of work applied for excluding retention. Retention is released under the contract, typically half at practical completion and half at the end of the defects liability period, and you receive it directly.
Why do so many invoice finance companies refuse construction?
Mainly contra charges and set-off. A main contractor can reduce what it pays against an application for plant, attendance or remedial work, which leaves a funder that has already advanced money short. Add the sector’s insolvency rate, the possibility of disputes and adjudication, and invoicing that does not follow the normal pattern, and most mainstream funders simply exclude the sector rather than build the expertise to handle it.
Can a new construction company get funding?
Yes. Construction factoring is one of the more accessible facilities for a new company, because the funder is assessing your main contractors rather than your own trading history. A start up subcontracting to a well rated main contractor can be easier to fund than an established firm working for a weak one. See invoice finance for startups.
Can I get construction finance with bad credit or a CCJ?
Often yes. Because the security is your applications for payment and the strength of your customers rather than your own credit file, adverse credit is not automatically a decline. Outstanding CCJs and HMRC arrears will need explaining and may affect pricing. See business finance with a CCJ.
Does CIS affect what I can borrow?
It affects the cash you receive rather than the facility limit. Deductions of 20% or 30% are taken from the labour element before payment reaches you, so the facility is structured around the net figure. Holding gross payment status removes the deduction entirely and improves cash flow noticeably. Our CIS gross payment status checker will tell you whether you are likely to qualify.
Apply For Construction Finance Today
We know which funders work in this sector
Fill in the form below and one of our professional business finance brokers will be in touch. Tell us your annual turnover, who your main contractors are, what contracts you work under and what retention is held, and we will tell you what is achievable. Free service, no broker fee on invoice finance or asset finance.
About the author
Marcus Wright is the owner and founder of Bolton Business Finance Ltd. He has worked in financial services since 2008, beginning his career at Santander, and spent time on the lender side at an independent invoice finance provider before becoming a commercial finance broker in March 2019.
He founded Bolton Business Finance in 2020 to give businesses access to the whole lending market rather than one bank’s own product range. The firm is a member of the National Association of Commercial Finance Brokers and works with a panel of 135+ lenders.
Call 0161 546 9128.
Bolton Business Finance Ltd is an independent commercial finance brokerage, not a lender. We are not authorised by the Financial Conduct Authority and can only complete non-regulated introductions. All lending is for business purposes only. Figures on this page are illustrative, describe general market practice as at September 2026 and are not a quote. Nothing here is legal advice on construction contracts or tax advice on CIS. Advance rates, pricing and eligibility vary between lenders and every application is assessed on its own merits. Registered address: Westgate House, 1 Westgate Avenue, Bolton, Greater Manchester, BL1 4RF. Company number 12495909.