What Is Construction Finance?

If your business is in construction, you will know how the unpredictable nature of the industry can put pressure on your cash flow. The way payment works can mean that although a large long term contract has been agreed, you can’t get the money as regularly as you need it. An effective way to release the cash that’s locked in lengthy construction contracts prior to a payment certificate being issued.

Why pick Construction Finance?

With Construction Finance your money is never tied-up. It takes the pressure off late payment concerns, even during lengthy contracts. And gives you the financial security to secure bigger contracts. Any construction-related companies paid on a monthly or contractual basis who are looking to maximize their working capital should consider this type of  construction development financing. New contracts bring new expense – from having to buy supplies upfront to paying employees weeks, or even months, before your first stage payment. Construction loans release the cash that’s owed to you, typically within a week. Even before completion certificates have been issued.

How does it work?

Construction loan lenders enables you to borrow against what you are owed on a contract and we can advance you a proportion of that amount up to £1.5 million.

Construction Finance Facts
  • Ltd companies trading for one year minimum and with a turnover of over £600k
  • Confidential Working Capital facility of up to £1.5m
  • Security required – personal guarantee, assignment of outstanding billing and WIP supported by a debenture
  • Funding within one week
  • Set-up and service fees apply
  • Fully confidential facilities managed by a dedicated construction team supported by specialist QS partner

The benefits to your business…

  • Your money is freed, not tied up in applications for payment
  • Boosts your working capital
  • Takes away the stress of waiting for payment
  • Lets you take on bigger projects
  • Gives you the power to grow your business
  • A rolling facility that’s there when you need it
  • Fully confidential facility managed by a dedicated construction team and
    specialist QS partner
THE FOUR MAJOR TYPES OF PROJECT COSTS

When planning your project and asking for loans, you’ll need to account for
four different types of costs:

1.Hard costs
a. Your direct construction labor and materials costs

2.Land costs
a. The cost of acquiring land and property— sometimes, land costs are
considered soft costs

3.Soft costs — all the costs you don’t see

a. Permitting
b. Architectural design
c. Engineering
d. Taxes
e. Insurance (liability, builder’s risk, title policy and contingency policy,
among others)
f. Construction bonding, testing and inspections
g. Developer’s fee or broker’s commission
h. Appraisal and legal fees
i. Interest on construction payments

4.Contingency reserve

a. You must keep a reserve fund at all times to make interest payments
and keep your project solvent
b. Lenders may require you to keep a certain reserve level, typically 5
percent of soft costs

Consider all of these costs before you ask for a loan. If you fail to account
for all of them, it’ll be a challenge to secure funding or even complete your
project.

Our in-house team of Funding Specialists will keep you with up-to-date insights to support you along the way.

Click here for next page Commercial Finance

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Construction Finance January 7, 2020