How Construction Factoring Finance Works
Construction Factoring Finance operates in a similar manor to a normal invoice finance facility. However, the invoice finance company will often involve a quantity surveyor who has the expertise to value complicated and often contractual construction related deals. This is normally outside of the expertise of a conventional invoice finance company.
Using Construction Finance, the invoice finance company can typically fund up to 70% of the value of invoices, as they are raised, with the balance being paid to you once the customer pays (less charges). This can release a significant amount of cash for any use within your business and as you raise more invoices, more cash is released so you no longer have to wait to be paid.
There are a number of product options that are available including credit control – the collection of the outstanding invoices and bad debt protection (non recourse) if required. The credit control collection of outstanding sales invoices can be handled on a completely confidential basis so that your customers are not aware that you are using a construction finance facility i.e. the factoring company undertakes the credit control function in the name of your business so your customers are unaware.
Which Types Of Businesses are Eligible for Construction Finance Funding?
There are a number of different sectors and trading methods that may qualify for Construction Factoring Finance but would not qualify for conventional normal forms of invoice finance. The following situations are suited to Construction Factoring Finance:
* If you have a CIS UTR number for your business.
* If you raise applications for payment – these can be considered for funding even if they uncertified applications for payment.
* Invoices raised on a stage payment basis – invoices that are raised in stages during the course of a contract that has not been fully completed may be eligible for funding.
The following sectors may also be eligible for funding:
* Construction contractors
* Construction sub contractors
* Construction of partitions
* Diamond drilling
* Dry lining
* Shop fitting
* Supply and installation of bathrooms
* Supply and installation of kitchens
* Supply and fit of double glazing
* Traffic management
* Fabrication of steelworks
* Property refurbishment
* Electrical contracting
To summarise, the development of Construction Factoring Finance by a few invoice finance companies has enabled construction sector businesses, that would not normally be considered for conventional invoice finance, to access funding of up to 70% of the value of their outstanding sales invoices. In addition, the invoice finance may be able to assist with collections in your name and provide bad debt protection.