17 Jun 2021
The construction industry is currently booming, enjoying the fastest growth rate in 7 years and it’s looking set to continue. Both commercial and residential building works have continued through a global pandemic and as demand increases, the industry remains one of the busiest in the UK. We explore the finance options available for construction businesses and some examples of how the funding can be used.
Designed specifically to support building contractors, sub-contractors and those working in the construction industry, construction finance enables businesses to fund their building projects without any hold-ups caused by lack of funds. It acts as a bridge for funds between the building work starting and the customer paying at the end when the project is finished. The settlement payments can take a really long time- think about the length of time it takes to build a block of flats- which means a construction firm can go years without having funds to buy more materials.
Due to the very nature of construction, it’s important for lenders to offer flexible payment options for building companies to help keep their sites running smoothly. With no real set ‘cost’ for each building project, the total amount of funds a business can borrow is also really varied, meaning finance options are tailored to each construction firm.
There is a range of finance options that will help keep building projects going such as equipment leasing for those bigger assets such as cranes, or secured loans which can help with common delays and issues faced within the construction industry.
Here at Funding Options, our panel of 120+ lenders are able to offer the following finance options for construction businesses to support their cash flow needs,
A secured loan is a loan based on the assets owned by your business. The lender will secure the funds you borrow against an asset from your company such as a commercial building, vehicle fleet and are great if a company director doesn’t want to offer a personal guarantee for the loan. Unlike unsecured loans, where a lender can set the amount, a secured loan is capped to the value of the asset or building that’s being financed.
If your construction company regularly invoices other businesses then you could use a form of invoice finance to help cover the outstanding costs of your build or project until the invoice is settled. Invoice finance helps a business carry on running efficiently when there are outstanding payments due and is a great short term solution. Invoice finance is a great option for construction companies that might have customers with longer payment terms.
There are two kinds of equipment leasing; operational leases and finance leases which both offer an effective way for construction businesses to lease the expensive equipment they need to keep the site running. From diggers, cranes and drills, those often expensive assets can be rented for a set amount of time from lenders, with a monthly payment agreement.
Unlike secured loans, an unsecured loan is a great funding option for businesses that don’t have many or any assets and don’t have security to offer a lender. These businesses might need the finance quickly or could be a fairly new company without assets, making this type of finance a great option for construction companies looking to start projects.
Once a company has the loan approved, it’s really down to the business to spend it where they need it most. From helping to increase the workforce, keep the cash flow going or buying materials in bulk, whatever your company needs to help keep the project going.
Some of the other ways to use construction funding includes;
Paying suppliers and contractors even if your invoices haven’t yet been paid
Funding new building projects
Buying materials and equipment
Increasing the workforce and paying wages
Generally helping cash flow for the business
We know that construction projects need a consistent cash flow to help keep things moving along which is why there are a few options available to your business. Whether it’s to help keep your projects going or to invest in essential machinery, there’s a funding option available to suit your construction needs.
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