As a sector, construction faces unique challenges that can impact cash flow and prevent growth. Construction is a competitive sector, and trading conditions are currently more challenging than ever. Staged payments, partial payments and long payment terms can slow construction businesses down, but having access to the funds can make all the difference.
If you work in the construction sector and cash flow is impacting your ability to grow as a business, invoice finance may be your best friend. Here, we’ll take a closer look at invoice finance for the construction sector, and discuss how it can help improve your cash flow.
What is invoice finance?
Invoice finance releases cash tied up in outstanding invoices, allowing you access to the money owed to you before your customer has paid.
A healthy cash flow is imperative to the ongoing success and growth of any business. Invoice finance means you can avoid the usual wait for invoices to be paid: instead, invoice finance ensures you get most of the cash immediately.
How does invoice finance work?
Invoice financing helps you to manage your cash flow by bridging the gap between the point at which you make a sale and the time payment is received from the debtor.
With invoice finance, businesses pay a small percentage of the invoice amount to the lender as a fee for borrowing the money. Nothing needs to be repaid at all to the funder, as the funder only collects their money from your debtors when the debtors pay their invoices.
When you apply for invoice finance, you’ll be offered a deal that gives you an advance amount, which is how much of the invoice your lender will pay up front (for example, 85%).
So for example, if you were to raise an invoice for £5,000, your invoice finance deal would pay 85% of the invoice up-front, so you would receive £4,250 into your bank account within a couple of days. Then, when the customer pays the invoice, the full £5,000 goes into a bank account controlled by the lender. The lender would then pay you the remaining value of the invoice (£750) minus the fees you agreed with them.
How quickly can I get invoice finance?
It’s relatively quick and simple to apply for invoice finance, and once your application is agreed you can expect to benefit from the cash within 24 hours.
Are there any disadvantages of invoice finance?
Whilst not necessarily a ‘disadvantage’, it’s worth noting that your customers (the people you invoice), will need to be other businesses rather than just members of the general public.
Whilst invoice finance can be secured quickly, it is sometimes time consuming to find and apply for the best deal. However, this shouldn’t be a blocker to any construction business applying for invoice finance, as a professional finance broker can help. A business finance broker will take the hard work out of finding and applying for the best deal for you, leaving you free to get on with running your business.
Am I eligible for invoice finance?
If your business regularly invoices for work, you could be eligible for invoice finance. A business finance broker can help you understand whether or not your business is eligible, and which are the best options for you.
Securing invoice finance for your construction business
If you work in the construction sector and are considering business finance options, the first step is to get in touch with a finance broker who specialises in business funding for the construction sector.
At PMD, we believe that no business should be held back by their finances. Invoice finance is one of the best ways to ease cash flow problems and ensure that your business can continue to grow.
PMD is experienced in securing invoice finance for businesses within the construction sector. We have access to over 150 lenders and will help to take the hard work out of applying for invoice finance, leaving you free to concentrate on running your business.
Get in touch today to see how invoice financing can help improve your cash flow and help accelerate the growth of your construction business. We also have other cashflow solutions available, such as business loans and asset refinance, as well as access to a panel of over 150 lenders to support UK SMEs.