Construction finance keep sites moving between payments

How we help construction businesses with finance

Construction finance covers the funding contractors and trades use to buy plant and vehicles, smooth out long payment cycles and take on bigger contracts without running the bank account dry. We are a broker, not a lender, so we compare lenders that understand applications for payment, CIS and retentions rather than treating them as red flags.

The core problem in construction is timing. Wages are weekly, materials merchants want paying on account terms, and plant has to be on site from day one, yet you might invoice monthly through an application for payment and wait 30 to 60 days or more for the money. Retentions can hold back a slice of every valuation until practical completion or the end of the defects period. Growth makes this worse, because a bigger contract means a bigger funding gap.

There are also sector-specific tax rules that affect cash. Under the Construction Industry Scheme, contractors deduct 20% from registered subcontractors' payments, or 30% if they are unregistered, unless the subcontractor has gross payment status, according to GOV.UK. Most supplies of building and construction services between VAT-registered businesses reported under CIS also fall under the VAT domestic reverse charge, so subcontractors do not collect output VAT from those customers. Both can change your cash position, so speak to your accountant about how they apply to you.

Why construction firms work with us

What construction firms fund with us

• Excavators, dumpers, rollers, telehandlers and access platforms
• Vans, pick-ups and tippers for site teams
• Working capital to mobilise a new contract
• Materials and stock ahead of a valuation
• Tools, site cabins, welfare units and IT
• VAT and corporation tax bills

Common needs and the finance that fits

Retentions and payment terms are changing

Late payment and retentions have been a long-running issue for smaller contractors. The government's Commercial Payments Bill includes measures to prohibit the deduction and withholding of retention payments under construction contracts, with timing for implementation still to be consulted on, according to GOV.UK. At the time of writing the Bill has not yet become law, so for now retentions remain a normal part of many contracts and lenders will still take them into account.

Until any change takes effect, the practical answer is to plan for retentions in your cash flow forecast and choose funding that does not rely on getting them back on time.

Plant hire firms

Plant hire businesses have a slightly different profile: a large, valuable fleet, utilisation that rises and falls with the building cycle, and customers on credit terms. That often makes asset refinance or hire purchase a strong fit, because the fleet itself can support the borrowing.

What lenders typically look at

• Recent accounts, management figures and business bank statements
• Aged debtor and creditor reports for invoice finance
• Contract details, valuations or order book
• Quotes or details for the plant or vehicles
• CIS and VAT status
• Directors' details and credit history