The construction industry has been hit hard in recent years, and with traditional banks being increasingly unwilling to lend, it is only the most innovative of construction companies that have been able to remain strong.
According to a recent survey by commercial finance broker Touch Financial, the evidence is that banks are continuing to starve small to medium sized construction businesses of the vital cash and support they need to grow.
It is also common knowledge that construction companies are among the worst hit when it comes to late payments. Furthermore, a recent parliamentary inquiry into the late payment of commercial debts has found that companies in the construction sectors are one of the ‘worst offenders’ in terms of late payments and poor treatment of suppliers.
MPs have recommended a shake-up in the construction sector, in the form of a ‘Construction Code of Conduct’, which will be led by an independent adjudicator. This independent entity would be responsible for turning payment terms and conditions on their head. But this is a solution that is still a long time coming, if at all.
Construction companies need funding now, to cover business costs or wages or to expand business growth.
The Cashflow Solution – Tailored Invoice Finance
“If a construction company needs an immediate injection of cash, and it can’t get funding from the banks, then we would recommend invoice financing,” says Simon Carter, Director of Touch Financial. “An invoice finance package advances a company a percentage of an invoice a company has yet to be paid for. It means that a company does not have to wait for the customer to cough up the cash, that in the case of a construction company can be 120 days or even more.
“Additionally, there is the option for companies working in the construction sector to get flexible invoice finance packages that cover uncertified applications for payments that are likely to occur during a construction project,” adds Simon. “By receiving an almost immediate advance on a project, a construction company can pay for supplies, wages and other investments that are needed to complete a job. It’s not a case of ‘the best lender’, but ‘the best fit lender for the business’.”
Some of the useful services which can be included in a construction invoice package finance include:
- Bad Debt Protection – payment on time as the lender will provide you with the cash you are expecting, just in case your customer goes insolvent in these difficult times.
- Management and Collection Facility – responsibility for managing and collecting any outstanding contract debts, saving companies time and money.
- Confidential Service – a totally confidential construction finance service.
- Dedicated Quantity Surveyors – access to dedicated quantity surveyors ensuring everything runs smoothly whilst receiving payments for a job well done.
- Solution of day-to-day funding issues – provide cash for new equipment or tools; help pay off suppliers earlier so a company can benefit from economies of scale discounts it previously may not have received.
“Many lending firms are reluctant to finance construction companies and tradesmen, but Touch Financial has links to lenders that will be more than happy to lend construction companies cash against future payments’,” Simon concludes.
For further information visit www.touchfinancial.co.uk.
