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Construction Invoice Finance 

Cash flow is the lifeblood for a construction company. A profitable business with poor credit control, can still fail if it cannot make timely overhead payments. Construction delays; contract variations; repeated under certification and disputes with the employer or main contractor negatively impacts on liquidity to fulfill contractual obligations and take on new projects.

In order to bridge the gap between paying business expenses and receiving payment, main contractors and subcontractors should consider invoice finance to ensure healthy levels of working capital.

Invoice finance is a flexible form of asset finance product secured against the debtor book. It releases cash tied up in unpaid invoices quickly and providing the facility runs smoothly, can mirror and pay as your business grows. Furthermore, with credit insurance, the business can be protected against against bad debt and/or slow debtor payment.

Invoice finance is a form of Construction finance and works by selling the invoice to a lender. The lender in turn, provides a pre-agreed funding line – advancing up to 70% of unpaid debtor invoices against uncertified applications for payment, stage payments or achieving certain milestones. Moreover, construction invoice finance is a cost effective if your business is profitable, has stable revenues and minimal debtor default.

Invoice discounting

Suited to companies with a dedicated sales ledger and credit control function. The lender pays a percentage, known as the prepayment level of up to 70% for invoices submitted for payment in advance. The borrower continues to manage the credit procedures and when the debtor settles, the lender advances the balance minus their fees.

Invoice factoring

More expensive than invoice discounting, the lender manages the construction firm’s sales ledger and credit control. They chase and collect outstanding invoice payments. The factor advances unpaid debtor invoices upfront in the same way as invoice discounting and pays the balance minus their fees.

Selective invoice finance

Also known as single invoice discounting or spot finance. Pre-payments are made against selected or individual invoices as opposed to invoices for the entire sales ledger. This would suitable a business with creditworthy clients, concentrated debtor book or sporadic cash flows. However, fewer lenders offer selective financing can be a more expensive way to raise working capital.

Lender criteria require contractors and subcontractors to be UK based; have minimum B2B annual sales of £250k, raise invoices on credit terms typically 14-90 days and work under a contract. Additionally, debtors should be reputable and credit worthy.

Quest Commercial Finance work with invoice finance providers with experience and expertise working with construction companies. Our objective is to match you with the right lender and negotiate the best invoice finance terms for your business.