Construction Finance

The construction industry has found it difficult to find finance due to its contractual nature, but construction finance from First Financial solves this problem.

Invoice finance is an attractive solution to negative cash-flow problems, and has proved a lifeline to businesses in most sectors, especially since the credit crunch. However, one sector which has found it particularly difficult to source finance in this way is the construction industry. This is why the construction finance solutions available at First Financial have proved such welcome news for this sector.

Invoice factoring, or invoice financing, is an arrangement in which a business sells on the invoices it has generated to the factoring company, who pays them an agreed percentage up front, and collects the payments from the customers. The big problem is that many factoring companies have been reluctant to provide this service to construction businesses, largely because of the contractual nature of the construction industry, which puts off many invoice finance providers. Each contractor can potentially outsource the work to a number of subcontractors, who in turn could outsource it to others, and so on down the chain. This means that the value and amount of work done at each point can be very unclear, and is often subject to dispute.

The good news is that there are some factoring organisations, such as First Financial, who are in fact able to provide construction finance. These companies make use of quantity surveyors to assess the value of the contractual deals, and verify the amount of the invoices. This is something that would be beyond the expertise of a conventional invoice finance company.

The provision of construction finance through factoring brings huge benefits to the sector. Because companies can receive the cash promptly, they are no longer forced to wait for payment for a previous job before getting on with the next stage of a project, or starting a new one. Subcontractors can also benefit from fast turnaround on invoices for the completed phase of a project, enabling them to start on the next stage rather than hanging around for weeks or months.

The building industry is notorious for delays, which can often inflate the costs of projects. In fact these delays are often due to late payments beyond the builders’ control, and are as frustrating for them as for their clients. The provision of construction finance through factoring can eliminate frustrations and delays, keep the costs down, and make everyone, including the clients, happy.

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First Financial is a trading division of FRP Advisory LLP. FRP Advisory LLP is incorporated in England and Wales under the Limited Liability Partnerships Act 2000 as a Limited Liability Partnership. Registered office: 110 Cannon Street, London EC4N 6EU. Partnership Number: OC355680.

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