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Invoice Finance for Construction

Category: General — Paul Morgan on January 9, 2013

Finding finance is difficult for any business. However, if you are in the construction industry, it tends to be even harder. Most construction businesses have much of their cash tied up in land, property and materials. Their overheads are quite high, with large crews to pay, as well as vehicles and plant to run. A lot can go wrong in the construction industry, so deadlines can easily be missed and finished properties can take a long time to sell.

Unsurprisingly, many lenders consider lending to constructors as high risk, so borrowing money is sometimes difficult. However, invoice finance for construction is a viable way to secure a loan.

For whom is invoice finance for construction suitable

The great thing about invoice financing is that it is a viable way for virtually any construction firm to raise money. That money can be used to carry a firm through lean times or give them the cash they need to take advantage of a business opportunity. For example, provide the cash to buy the building materials or hire the plant needed for a new job. At some point, virtually every building firm could make use of extra cash.

Most firms have outstanding invoices. This means that invoice finance is a form of borrowing that the vast majority of construction or building firms can access.

How it works

The process is simple. If a firm is owed money by a client, they can use their invoice as collateral for a loan. Once the client pays the invoice, the money borrowed is paid off along with the fees for the loan.

How much can be borrowed varies depending on the amount owed and who owes it. It is possible to borrow up to 90% using invoice financing. In other words, a firm owed £2,000 by a customer could potentially raise £1,800 against that invoice.

The advantages

The whole process is simple and, importantly, is extremely fast. It is possible to borrow against multiple invoices owed by a single client or across invoices from a range of clients.

A business does not necessarily need a pristine credit record to take advantage of this borrowing vehicle. It is also a relatively inexpensive way to borrow money for a short period.

Getting access to invoice finance for construction

At Invoice Finance Scotland, we offer a range of ways for construction companies to borrow money, including invoice financing. For construction companies or independent builders, as well as large refurbishment and building maintenance firms, our services are very suitable and can be tailored appropriately.

Factoring Companies

Category: General — Paul Morgan on

Factoring companies provide firms with a vital service. They help thousands of firms to gain access to the money they need to prosper and grow.

Cash is the lifeblood of business

Without easy access to money, staying in business and expanding can be difficult. Virtually every firm needs a little extra money at some point. This is true regardless of the financial climate.

In a recession, firms need cash to help take them through quiet times. To stay in business during flat times of the year, they may need to borrow money to pay their overheads. For example, many retailers just need to tick over until Christmas when they can sell enough to pay off loans and tick over for the rest of the year.

During boom times, many firms want to grow, but do not always have the cash to do so. Even in a recession, some firms want to expand. They want to take advantage of the fact that other firms in their industry are going out of business by buying them up or buying their stock, products, and plant. Needless to say, this is not easy to do without quick and straightforward access to money.

The problem

The problem is that extra cash is not easy to generate quickly. Even well established, profitable firms can find borrowing money difficult.

The conditions of many loans are very restrictive. In addition, arranging loans from traditional financial institutions can take a long time. For firms operating in today’s fast moving business environment, this is far from ideal.

Factoring companies can help

Fortunately, there is an alternative way to borrow money, called factoring. This is a form of finance to which the majority of firms can gain access easily and quickly.

Factoring is a way for companies to borrow money against what they are owed. One of the most common types is invoice factoring. Companies owed £3,000 by another company can borrow up to 90% of what is owed from a factoring firm. This form of finance can potentially be set up in days. When the customer pays the invoice, the debt owed to the factoring company is paid along with the fees.

At Invoice Finance Scotland, we consider ourselves one of the most innovative and flexible factoring companies available. We pride ourselves on coming up with new ways for firms across all industries to raise the money they need to take advantage of new business opportunities or simply make it through to the next trading month. Our service can be tailored to meet the needs of every firm.

Construction Financing

Category: General — Paul Morgan on

Construction financing can be tricky. Most construction firms have to tie up a lot of money in projects. The materials and labour needed to build even the most basic building are expensive. Once the building is built, it can take a long time to sell – in some cases months or years.

The challenge of construction financing

These issues mean that construction firms are faced with a big challenge and that is cashflow. Finding the money to fund the next project is very difficult indeed. If sales slow, even slightly, it can be difficult to cover labour costs and buy materials for projects in progress.

Getting financing to cover dips in cashflow can be problematic. There is a relatively high level of risk involved in lending to construction firms, making them unattractive to many finance companies. The sums involved are often big and there is a lot that can go wrong, meaning that there is a significant risk of the construction firm not being able to meet loan repayments. If that happens, a financial institution can struggle to get their money back, often there are not many stable assets available against which to secure loans. The value of the assets available for use as collateral is in a constant state of flux. Take land, for example – the value can rise rapidly but it can also fall quickly.

New firms and tradesmen

Unsurprisingly, not too many financial institutions are prepared to lend to construction firms. The newer the firm is, the harder it tends to be to get finance. More or less the only way to raise cash from traditional financial institutions is taking out a mortgage against land or properties owned by the firm. A firm that does not own much is extremely limited in where it can borrow. It is easy to become cash starved.

Jobbing or maintenance builders and tradesmen face the same challenge. They usually do not own any property against which they can borrow. However, a firm that carries out extension or loft conversions still needs to borrow money as part of its construction financing.

Getting finance is a slow process

It can take a long time to secure finance. Most financial institutions carry out lots of checks before lending to construction firms. For a company who needs that money to buy materials to complete an existing project, that presents a big problem.

The solution

Fortunately, there is an alternative solution. Construction financing is available from us for all kinds of construction firms. The service we at Invoice Finance Scotland offer can provide most firms with the money they need, when they need it, and at an affordable price.

Cashflow Management

Category: General — Paul Morgan on

For firms, effective cashflow management is extremely important. A firm with good cashflow can grow faster and be in a position to survive in a difficult trading environment. However, getting the flow of cash through a company in the right way is a challenge.

Planning is essential

Most firms plan their cashflow carefully. They understand the need to have cash available to buy raw materials, pay their bills and provide their workers with wages. For those firms, when things are running normally, there are relatively few problems with cashflow.

When the problems start

However, when something that is unplanned for happens, a company can quickly find itself struggling. Examples of this may include a large customer not paying a bill on time, or the cost of an essential raw material or power suddenly rising. At this point, a company can find itself short of cash, unable to pay its workers or buy raw materials to fulfil orders they already have on their books. Unless they get hold of cash, and fast, the company can quickly enter a downward spiral.

Sometimes, even positive events present firms with cashflow issues. A firm that has been offered a large order by a new customer may struggle to find the money to buy the raw materials and pay for the extra labour to complete that order.

Cashflow problems can stand in the way of a firm growing and prospering. It can also prevent a firm from taking advantage of opportunities for example buying out a struggling firm in their market, or picking up cheap used equipment and stock.

Firms with extra funds on tap are the ones that succeed the fastest. Cash is the lifeblood of business, giving firms the agility and flexibility needed to take advantage of opportunities as they arise and fulfil the expectations of the customers they already serve, making cashflow management vital.

Getting help with cashflow management

Most of the time, a short-term loan is all a company needs to get over cash flow issues. However, getting access to a short-term loan is far from easy. Most banks, building societies, and traditional financial institutions are not geared up to lend money on a short-term basis. The few that are often move slowly, frequently taking weeks to approve a loan, which is more or less useless in the modern business environment.

We can help

Over the years, Invoice Finance Scotland have helped thousands of firms with their cashflow management. We have lent companies money against their assets, including outstanding invoices, machinery, property, raw materials, and finished products. Our service is fast, flexible, relatively inexpensive, and suitable for practically any business.

Asset Management Solution

Category: General — Paul Morgan on

Most firms need extra cash at some time or another. They may need extra funds to take them through slack times, whether they are seasonal or caused by a lack of demand. Sadly, for many firms, raising extra funds is becoming increasingly difficult. This is leading to some firms going out of business simply because they cannot get help with cash flow. This is especially sad because using an asset management solution, most firms can actually raise the cash they need. It can help firms to do far more than survive. Extra cash can help a firm to expand.

What is meant by an asset management solution?

An asset management solution to improve cash flow involves borrowing money against a company’s assets. Most companies have heard of borrowing money using property as security, but many do not realise that there are other assets that companies can borrow money against.

What assets can companies borrow against?

Virtually anything that can be sold on can be considered an asset. This includes machinery and plant, raw materials, finished products and property. It is even possible for businesses to use what their customers owe them as collateral for a loan. This is known as invoice financing. If a customer owes a business £1,000, the business can secure a loan against the value of that outstanding invoice.

How much can they borrow?

How much a company can borrow varies. To some extent, it depends on the type of asset being borrowed against.

For invoice finance, it is usually possible to borrow up to 90% of the value of the invoice – in other words, £900 against an invoice of £1,000. If firms want to borrow against their raw materials, the amount they can borrow is less at 30%. For plant and machinery, it is around 80% of the used market value of each item. For property, it is 60%, and for finished products, it is around 50% of its value. That is 50% of the wholesale value of the finished product, not the retail value.

In most cases, a firm having a poor credit rating is not a barrier to borrowing in this way. Firms just need to be able to prove that they are profitable.

Talk to us

We can put together a tailored asset management solution for most firms. At Invoice Finance Scotland, we understand that every firm is different. We have helped firms to borrow up to amounts in the eight figure bracket by borrowing against their assets.

Asset Finance Solution

Category: General — Paul Morgan on

In the UK, hundreds of firms are looking for an asset finance solution. They know that they can potentially borrow money against their assets, but do not know how to go about doing so.

In many cases, firms have tried to borrow money in the traditional way, but have found that banks, building societies and other financial institutions are not interested. Even when they are willing to lend money, many charge high fees, high interest and there are heavy financial penalties for not meeting the repayment schedule.

Fortunately, borrowing money against assets is relatively easy to do and is something most firms can take advantage of. It is providing a lifeline to hundreds of firms.

Finding the right asset finance solution

However, it is important to do research before borrowing money against assets. Firms need to understand how much they can borrow, how long they can borrow the money for and how much it will cost. There is some flexibility with this kind of loan, but it is also important to understand what would happen should repaying the loan prove difficult.

How much can be borrowed

Businesses can borrow against a range of assets, not just their property, plant and machinery. How much will be lent to each firm varies, but typically, the following can be borrowed:

  • Up to 30% of the value of raw materials
  • Up to 50% of the value of finished products
  • Up to 60% of property assets
  • Up to 80% of the market value of most types of machinery and plant
  • Up to 90% of the value of outstanding invoices

How long can money be borrowed for?

Most of these loans are designed to be short term, in particular invoice financing. However, longer-term loans can be arranged against certain assets, especially property.

How much borrowing this way costs

The cost of borrowing this way varies, but all rates compare favourably with other forms of lending. The exact costs are outlined for each deal to make sure that firms are able to pay the interest and understand the full cost of this type of lending, as well as the cost should any repayments be late.

Speak to us

Those looking for an asset finance solution that is tailored to the needs of their firm can speak to us at Invoice Finance Scotland. We will explain everything in as much detail as is needed. Our clients can speak to us over the phone, e-mail us or fill out our online quote form.

Business groups welcome rate review

Category: General — Paul Morgan on December 4, 2012

The Scottish Chambers of Commerce and other business groups have welcomed a (more…)

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