Construction Finance For UK Companies

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.

If you are involved in the construction industry, there any 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 01204 860113 or fill in a contact form here.

finance for construction companies

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 profession 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 looks at each options 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

Construction Invoice Finance

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/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

Construction Factoring

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 sector. This is due to a number of things such as high insolvency rate, contractual obligations and none standard invoicing (applications for payments & 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 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.

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Construction Equipment Finance

If you are looking to purchase 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 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%+)

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