Invoice finance for construction companies in the UK

Cash flow is the primary obstacle to growth in UK construction. Even profitable contractors fail while waiting 30-90 days to be paid. Invoice finance has become a crucial funding mechanism for construction businesses of every size.

Why cash flow is structural in construction

• Extended payment cycles of 30-90+ days
• Retentions holding 3-5% of contract value
• Front-loaded costs across labour, materials and plant
• Stage payments and valuations
• Delays caused by applications or disputes

Meanwhile weekly wages, supplier terms and HMRC deadlines don't move. The result is a permanent funding gap.

How it works here

Invoice finance unlocks cash from unpaid invoices immediately rather than waiting for the client. Lenders typically advance 50-70% within 24 hours, with the balance less fees on client payment.

The four structures

• Invoice factoring, lender advances cash and manages collections. Best for smaller contractors.
• Invoice discounting. You keep ledger control, usually confidential. Best for established firms.
• Selective invoice finance, fund specific invoices only. Best for project-based needs.
• Application or valuation finance, funds stage payments and interim valuations. The structure that matters most in construction, and the one generalist lenders usually can't offer.

Cost

Most construction firms pay 1.5-4% of invoice value for immediate access.

The three questions we're always asked

Will customers know? Factoring may require disclosure. Discounting is typically confidential.

What about retentions? Specialist lenders structure for them, some exclude retentions, others fund net-of-retention values.

Pay-when-paid contracts? Generalist lenders refuse them. Construction specialists structure around them.

Qualifying

• B2B or government customers
• Trading history and functioning invoicing processes
• Reasonable margins

Companies with CCJs, weak balance sheets, rapid growth or tight cash flow often still qualify, because the risk assessment looks at your customers rather than at you.

Common mistakes

• Using generalist banks instead of construction lenders
• Excluding applications or retentions
• Inflexible limits that constrain growth
• Aggressive credit control that damages client relationships

For an independent, no-obligation review of your options, call 0330 0438 011.