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• 10 Jul

  5 Secrets About Getting Construction Finance

  The construction sector has been notoriously difficult to finance due to the many issues that tend to come as part and parcel of working within the sector. These are problems such as stage payments, raising applications for payment instead of invoices, and having complicated contracts with main contractors, to mention but a few.

  There are a number of financiers who are specialists in funding the construction sector, but there are still many misunderstandings about the various nuances of finance that are available. There are many aspects that remain unknown although the financiers would like you to know about them.

  5 Secrets About Getting Construction Finance

  Below we have shared 5 secrets about getting construction finance:

  1. You Can Get Funding Against UNCERTIFIED Applications For Payment - financing applications for payment (which 75% of the trade uses instead of invoices) often require the applications to be certified by the debtor. This narrows the period of funding significantly, to maybe a few weeks. However, it is possible to get finance against uncertified applications for payment, significantly accelerating the stage in the process at which you can access finance.
     
     
  2. Construction Finance Can Fund Single Debtors - man businesses start out with just one customer. If you only have one customer you may want to read our Top 5 Tips If You Only Have One Customer, but you may also be surprised to know that you can get funding against transactions to a single customer within the construction sector, with no prime debtor restriction. Not all funders can offer this.
     
     
  3. It Can Be Confidential - if you are worried about customers becoming aware that you are using finance against your applications or invoices you may prefer a confidential arrangement - however you may also still want the credit control benefits that come with factoring. Confidential factoring for construction projects may be a great option in that situation, and it does not require you to have the same level of accounting process automation that you may need to qualify for invoice discounting. Confidentiality can also help you get funding against contracts that include a "ban on assignment" clause (which prohibits an invoice from being assigned to an invoice finance company).
     
     
  4. You Can Get Finance Against Final Accounts - the final account is often the last 10 to 15% of a construction contract that is invoiced at the end of the job. Often a main contractor might seek to achieve a price reduction by asking for this to be wiped off. In view of this, it is often not funded by financiers. However, you can get finance against final accounts providing they are either certified or confirmed e.g. by email, from the main contractor.
     
     
  5. You Can Finance Civil Engineering Projects - can be a difficult sector to get funded due to design obligations. However, there are specialists who have successfully funded civil engineering projects. This is done by using a Quantity Surveyor to understand the contract and the design obligations so that the level of prepayment can be set at an appropriate level.

  By Glenn Blackman