Construction Finance

Intro to Construction Finance

Construction finance is a way of funding assets for your business. It allows you to protect your cash flow by reducing your outflow and using an outside source to fund the things your business needs. The nature of the industry means that often unexpected costs can crop up, with different suppliers requiring payments that could not have been premeditated.

Construction finance enables you to keep your company running smoothly.

What is Construction Finance?

Construction finance frees the cash in your business secured in applications for expenses (certified and uncertified) and invoices for work completed. This process removes the need to borrow funds to bridge the gap while you're waiting for customers to pay. It acts as an umbrella term encompassing the various kinds of funding available to businesses in the industry.

Businesses have lots of overheads to think about that can create problems for new projects, such as wages, equipment hire fees and job expenses. These costs can not wait, but the business may not receive the money it's owed for months.

You can either use construction finance for complete work or work that's still under construction.

What are My Construction Finance Options?

Many finance options are available for your next project, whether for new machinery, commercial vehicles, buildings, or agricultural equipment.

Types of Construction Finance

Invoice Financing

Invoice financing is a type of loan that allows you to borrow money against the value of your invoices. In simpler terms, rather than waiting for your customers to pay you - you can borrow money to finance your business for a fee. This option frees up cash for your business rather than having it tied up with you unable to spend it to progress the company.

The lender uses your outstanding invoice as collateral to deliver you the funds, which prevents your other business assets from facing risk.

Benefits of Invoice Financing

- The business receives funds quickly

- Loan fees are reasonable, providing they are repaid on time

- It doesn't require a long-winded payment structure

Invoice financing is a way of funding construction.

Asset Finance

Asset finance provides a few different ways of paying for equipment. An asset is an item or goods with a monetary value that a business or an individual acquires. You'd pay this back over time with added interest like any other loan.

The most common forms of asset finance are leasing or hire purchase. When leasing, you pay a company in instalments to "rent" the asset over a fixed period. With hire purchase, you may pay slightly larger instalments but own the asset once you have made the final payment.

Alternately, construction finance can be a form of invoice factoring (which is a variation of invoice financing). This form of funding involves a finance provider, such as a bank or independent company, paying your business a large amount of the invoice's value upfront. Then, the lender becomes responsible for the debt your client owes.

It's important to remember that you do not initially own the equipment with either of the options mentioned above. You may choose to buy outright at the end of the agreement, but the leasing company owns it while you're paying for the equipment. These are good options for financing equipment as you can start earning on it before you have paid for it.

Construction finance can cover a range of assets.

Benefits of Asset Finance

- You gain access to an asset you earlier may not have been able to afford

- Flexible repayment terms - agreements can last anywhere from one to 6 years

- Some contracts will allow you to upgrade the equipment at the end of the period, keeping you ahead of your competitors

Benefits of Construction Finance

A cash flow shortage may mean you can't spend capital on essential costs, such as construction tools, supplier expenses, labour costs, bills, etc. Construction finance allows you to pay these outgoings before being paid by the main contractor. It's fast, stress-free, and you should no longer need to stress about cash flow.

- Stay on plan and satisfy targets

- Get up to 95% of the invoice amount in as little as 24 hours

- Bad Debt Protection (BDP) is available to shield against non-payments

- Designed for contractors and subcontractors in the construction sector

- Clients don't even need to know you are using a lender for funding; you can keep it confidential if you wish

- Improves cash flow for your business

- You can take on more significant projects with confidence as you have better working capital

- Reliable, long-term solution

Construction finance allows you to protect the cash flow in your business.

How Much Can I Borrow With Construction Finance?

It depends on what type of thing you want to finance; there are various options for you. Some factors it can rest on are:

- The size of your company

- Your credit history

- The industry in which you operate

Love Finance works with a wide panel of financial lenders who offer low rates and are able to work around what your business needs.

Even if you're not qualified for construction finance, getting a construction loan for more general working capital purposes may be possible.

Whether you can get construction finance depends on a few differing factors.

Conclusion

Construction finance has a wide range of ways to benefit your business. It is an excellent option for small businesses that need to rely on their funds for profits. It alleviates pressure by keeping the cash coming in and spreading payment costs.

Visit Love Finance today to find out how we can help you fund your construction finance.

Read below for some helpful links on other assets we can help you finance:

Examples of construction equipment financing:

Plant lease

Front loader finance / Loader finance

Mixers financing