Construction Invoice Finance
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What is construction invoice finance?
Construction invoice finance is a type of invoice financing that is designed specifically for construction companies.
It is designed to improve business cashflow and offer upfront payment for invoices that are agreed on delayed payment terms of 30 days to 90 days.
Construction companies often struggle to secure the right invoice finance deal, as the nature of contracts means that the debt is often not ‘factorable’.
At ABC Finance, we work with lenders across the market, including some that specialise in companies in the construction sector.
How does it work?
It works as follows:
- Credit control – Depending on the product chosen, either your business or the lender will chase the invoice for payment. Invoice factoring sees the lender handle credit control, and invoice discounting leaves the responsibility with you.
- Invoice paid – When the invoice is paid, you receive the balance, minus your agreed finance charges.
- Invoice raised – You simply raise your invoice to your customer as you usually would and send a copy to your funder.
- Receive payment – Your lender pays you up to 95% of the invoiced amount within 24 hours
What are the key use cases for factoring advances for construction businesses?
The biggest use case for debt factoring in the construction industry is to improve company cash flow. By receiving 90-95% of the invoice value upfront, it enables a company to grow, without being held back by its bank balance.
The security of a business is in its cash flow – if you face issues in any other area of the business, it can be traded through as long as cashflow is sufficient, so protecting this vital area can prevent issues in the future.
What are the advantages and disadvantages of invoice finance for construction businesses?
The advantages of invoice finance are:
- Improved cash flow – Upfront payment massively improves the cash flow of a business.
- Ability to grow – These facilities can increase in size as you build your turnover.
- Saves time and resources – When credit control is included, you can save time and resources that would otherwise be used chasing payments.
- It’s a fast and convenient way to borrow – It’s a very fast way to secure funds, with payment within 24 hours of a new invoice being raised.
- It is flexible – Invoice financing can grow when your business does and contract during the quieter times, reducing your finance costs. This flexibility makes it perfect for the ebbs and flows of business.
The disadvantages are:
- It costs money – While the cost is low, there is still some cost, which will ultimately reduce your profitability if you don’t use the facility to drive growth.
- Factoring takes away credit control – While this is a positive for some, it doesn’t work for every business. If you want to retain control of managing your sales ledger, consider a confidential invoice discounting facility instead of factoring.
Will I be eligible?
If you run a construction business that operates B2B and on delayed payment terms of 30 days or more, there is a great chance that you’ll be eligible.
When applying for invoice finance, the lender bases their lending decision on the strength of your customers and the terms of your contracts.
Invoice financing is usually much easier to secure if an invoice is raised upon sign-off of that work. Without sign-off, funding can be more difficult as there is no guarantee that the invoice will not be disputed.
As we offer a range of business finance products, we can assess your circumstances and give you a strong indication of whether you’ll qualify.
If you don’t, we have a range of other products that could be a better fit and secure you the funds that you need.
What is the best way to secure construction invoice finance?
The best way to secure invoice finance for a construction business is through the ABC Finance invoice finance comparison tool.
Our online platform enables you to compare offers from the leading lenders in minutes.
To get started, you simply input your requirements and your business details, and within minutes, the leading lenders in the market will begin competing for your business – offering their best deals to you.
All quotes received come through the platform, and no lender has your contact details or consent to contact you, meaning you won’t have to sit through endless sales calls.
Of course, should you need help sorting through the offers, our team of experts are on hand to talk you through the options and how their offerings compare.
