Construction finance

Finance for construction firms

Construction firms carry a specific set of pressures — plant sitting idle between contracts, retention money held back for months, and payment terms that lag well behind materials and labour costs going out. We structure funding around the contract cycle rather than treating it as a generic business loan need.

Category: Sectors & audiences

Product: Asset Finance

Asset finance size: £20k – £3m
Invoice finance advance: Usually 70-85% (construction sector discount applied)
Retention typical: 3-5% held for 6-12 months
Term: 2-7 years for plant/machinery

Plant and machinery finance

Diggers, cranes and specialist equipment are usually funded through hire purchase or leasing rather than cash purchase, preserving working capital for wages and materials between contracts. Lenders familiar with construction plant price resale values more accurately, which affects both the deposit required and the rate offered.

Cashflow through the retention and payment cycle

Construction contracts routinely hold back 3-5% retention for 6-12 months after practical completion, and main contractors can take 30-60 days or longer to pay subcontractor invoices. Invoice finance is available for construction, though lenders typically apply a discount to reflect retention risk and the complexity of contract-based invoicing (applications for payment, certified valuations) versus a straightforward sales invoice.

Funding a specific contract or project

Some lenders offer contract or purchase order finance sized against a specific won contract, releasing funds to cover materials and subcontractor costs before the first payment certificate is received. This suits firms taking on a contract larger than their normal working capital comfortably supports.

Bonding and performance guarantee requirements

Larger contracts often require performance bonds or parent company guarantees, which sit alongside — and interact with — a firm's wider finance facilities. Lenders assessing overall exposure will look at bonding commitments as part of the total risk picture.

Premises and yard finance

Owning a yard or depot for plant storage and materials avoids ongoing rent and gives room for growth, financed via a standard commercial mortgage provided trading history and serviceability support the borrowing.

Frequently asked

Can I get finance for a specific large contract I've won?

Yes, contract or purchase order finance is available from some specialist lenders, sized against the value and payment terms of that specific contract.

Does invoice finance work with retention money?

It can, though most lenders apply a discount or exclude retention amounts from the funded balance, since retention isn't released until defects periods complete.

Can I finance used plant and machinery?

Yes, most asset finance lenders will fund used plant, with terms reflecting the equipment's age and remaining working life.

How do lenders view a construction firm with lumpy cashflow?

They expect it — lenders experienced in construction look at contract pipeline and historic trading pattern rather than expecting smooth month-on-month revenue.

Do I need a bonding facility alongside my finance?

Only if your contracts require performance bonds; if so, we factor bonding exposure into how we present your overall finance position to lenders.

Fund your next contract or plant purchase

Call 0345 2690628 to structure finance around your contract cycle.

Call 0345 2690628 Send your deal details