Construction company directors forced to lend more of their own money to their businesses
3 April 2018
- Over £500m lent by construction bosses to their own companies last year to cover cashflow shortfalls
- Carillion collapse could leave smaller companies short of funds
There has been a 35% increase in money loaned by construction company directors to their own businesses to keep them afloat over the past year, says Funding Options, the online business finance supermarket.
Funding Options’ analysis of Companies House data shows that directors in the sector lent £548m to their own companies last year*, up from £408m the year before (from filings of over 180,000 construction companies), as small construction companies struggle to access bank lending.
The value of money lent by construction company directors to their own companies rose 35% last year
Funding Options says that there are fears that smaller construction business owners, who represent the vast majority of these loans, may be forced to further increase this lending following the collapse of Carillion, which has caused disruption across the construction industry.
Many businesses who were subcontractors for Carillion will not be paid for their work – increasing the likelihood of those businesses’ directors having to cover cashflow shortages.
Previous research into the construction sector by Funding Options reveals that construction businesses are now having to wait 69 days on average to receive money that is owed to them by customers –up from 52 days five years earlier.
Funding Options adds that businesses facing difficulties in covering their cashflow should investigate what finance options are available to help them. With bank lending still in relatively short supply, alternative sources such as crowdfunding, asset finance and invoice finance can fill the gap.
Conrad Ford, Founder of Funding Options (https://www.fundingoptions.com/), says:
“Construction bosses have been forced to dig deeper into their own pockets to help their companies survive.”
“Many directors will be worried about Carillion’s collapse and the knock-on effect it might have on their businesses – many will have already seen an impact.”
“It may be the case that bosses are forced to make a final decision on how much they can fund their own companies – but where bank lending to construction companies and smaller businesses has fallen away, there are many alternative sources of finance.”
* Companies House filings in 2016/17