Construction Finance: The Top 6 Providers in the UK

Don’t miss out on new contracts because of poor cash flow. Browse our top 7 construction finance providers in the UK, and get fast, flexible funding for your next project – today

	Best for	Minimum annual turnover required	Finance available	Cash advance up to
Bibby Financial Services	Fast payouts and flexible contracts	None	Not stated	90%
Nucleus Commercial Finance	Funding larger projects	£1 million	£100,000 to £50 million	Not stated
Paragon	Asset finance	Not stated	Not stated	Not stated
Aldermore	Customer support	£250,000	Not stated	70%
Ultimate Finance	Invoice finance	£600,000	Up to £1.5 million	Not stated
SME Loans	Small business financing	£60,000	Up to £500,000	95%

The people. The coffee breaks. The humour. There’s certainly a lot to love about being in the construction industry.

Having to wait up to three months to be paid for a project, though, isn’t one of them. But for contractors and subcontractors, it’s a frustrating, yet all-too recognisable part of life. While wages, equipment hire fees, and job expenses all need to be paid now, you may not get the money you’re owed for months. 

We can’t make the construction industry any fairer. We can, however, recommend a few construction finance providers to help redress these imbalances. Offering fast, flexible funding and an intimate knowledge of what makes your business tick, the 7 construction finance companies below come with the finest pedigree.

But what is construction finance, exactly, and how can it benefit you? And more importantly, which of our top 7 construction finance companies is best-suited to the specific requirements of your construction business?

Let’s find out.

What is construction finance?

Construction finance is how contractors and subcontractors bridge those long waits for payment – for work that’s already complete, or still under construction.

Construction finance is an umbrella term, encompassing the various kinds of funding available to businesses in the industry. 

On the one hand, it can come in the form of a fairly straightforward loan, which allows you to purchase the equipment, labour, or materials required to complete a job. This is called asset finance. Like any other loan, you’d pay this back over time (with added interest, of course).

Alternatively, construction finance can be a form of invoice factoring. This popular form of funding involves a finance provider (they can be banks or independent companies) paying you a large chunk of your invoice’s value (sometimes up to 90%) upfront. In most cases, the finance provider also assumes responsibility for chasing your client for the debt.

When your client eventually settles up, you’ll get the rest of what you’re owed – minus a fee for the initial funding.

This form of invoice-based funding differs from other types of construction finance, such as secured or unsecured loans, or equipment leasing. With invoice factoring, you’re only borrowing money that’s already owed to you. There’s no collateral needed, and you won’t have to worry about how you’ll pay the loan back.

Invoice finance is flexible, too. You can choose whether you want the finance provider to chase your client for payment (factoring), or keep that duty in-house (discounting). Oh, and it’s all done quickly, too – some finance providers pay out within 24 hours.

Basically, you can wave goodbye to cash flow problems, or having to turn down projects due to lack of funds. Construction finance is your shortcut to scalability – so let’s find the right provider for your business.

The best construction finance companies in the UK

Taking into account fees, customer support, and accessibility, we scoured the market to name our top 7 UK construction finance providers on the market.

Our research indicates that the best construction finance comes from Bibby Financial Services, Nucleus Commercial Finance, Paragon, Aldermore, Ultimate Finance, and SME Loans.

We should add that the providers appear here in no particular order. 

That’s because each one offers different eligibility criteria – some will require that you meet certain thresholds regarding annual turnover or invoice value, or have been in business for a certain amount of time.

Bibby Financial Services

Best for flexible contracts and fast payouts

• Funds released within 24 hours of invoice upload
• Release up to 90% of your invoice’s value
• Flexible, 30-day rolling contracts available
• No minimum annual turnover required

Customers say:

“After years factoring our invoices with HSBC, the pandemic forced us to choose an alternative. Luckily, Bibby came in and saved our business. From the day we decided to move to Bibby, the process was very easy to follow – Bibby was very quick and proactive getting us on board. The people at Bibby have been really helpful, and the online portal is very easy to navigate.” – Jessica, August 2020.

Nucleus Commercial Finance

Best for funding larger projects

• For businesses with an annual turnover of at least £1 million
• Invoice finance available from £100,000 to £50 million

Customers say:

“Working with Nucleus Commercial Finance has been one of the most enjoyable experiences. They know what they’re talking about, know what is best for you, and are totally honest and transparent. Never at any point did I feel as if they were trying to scam or upsell me.” – Kris, January 2020.

Paragon

Best for asset finance

• Release up to 95% of your invoice’s value
• No minimum turnover specified

To dig deeper into how Paragon is helping Derby-based demolition merchant Cawarden take on bigger projects, explore our construction finance case study below.

Customers say:

“Paragon is easy to deal with as their team likes to meet customers face-to-face, which is important to us – and to the agricultural sector as a whole. 

“We appreciate the direct contact we have with [Paragon Business Development Manager Ian Smith]. He sorts all the information he needs directly with our accountant on our behalf, and takes the hassle out of the situation for us.” – Thomas, June 2020.

You’re almost finished with our list of the top 7 best construction finance providers in the UK. Time to start comparing quotes?

Simply hit one of the buttons below to start our quick questionnaire. It takes just 30 seconds to do, and by telling us more about your construction business’ specific requirements, we can help ensure that you receive the best, most personalised rates on funding.

Aldermore

Best for customer support

• Release up to 70% of your invoice’s value
• For businesses with an annual turnover of at least £250,000

Customers say:

“I cannot speak highly enough about Aldermore’s service on the telephone. It takes a while to get through due to high demand, but when you do, the operators are excellent. They’re helpful, friendly, and in our case went the extra mile to sort things out.” – Stephen, September 2020.

Ultimate Finance

Best for invoice finance

• For businesses with an annual turnover of at least £600,000
• Access up to £1.5 million in confidential invoice finance

Customers say:

“Ultimate Finance is a fantastic company which always goes the extra mile. We receive a professional, friendly service, and Ultimate Finance keeps us informed every step of the way. 

“We mainly use the Asset Finance and Invoice Finance products – both of which have been developed into customer-friendly offerings, which suit our business. I would recommend Ultimate Finance without hesitation.” – Chris, October 2020.

SME Loans

Best for small construction business financing

• Release up to 95% of your invoice’s value
• For businesses with an annual turnover of at least £60,000
• Access up to £500,000 in funds
• Get matched with a construction finance provider that meets your needs

Customers say:

“I wasn’t aware of SME Loans before, but I’m so glad I found them. Applying for  finance really does take just five minutes! The lender was easy to work with, and I got a great deal.” – Michael, October 2020.

Case study: how Cawarden uses construction finance to scale

Leicester Royal Infirmary. Derby County FC’s Baseball Ground. We hope you weren’t too attached to the previous incarnations of these popular British buildings – Midlands-based demolition firm Cawarden took care of them both, in order to make way for bigger, better varieties. 

But would it all have been possible without construction finance?

Owner William Crooks used Paragon’s asset financing service to upgrade key elements of his machinery. With funding, Crooks was able to trade his old excavators up to mobile crushers and attachments. In his own words:

“What is important to me is that Paragon doesn’t just know about the finance, but understands the business I am in – and the machinery too. Whenever I do a deal through Paragon, I know I will get a good quality service. If there is a problem, the team is just a phone call away.”

Another deal saw Cawarden fund a range of new equipment necessary to get a project over the line – in this case, the destruction of an old bottling plant in Burton-upon-Trent. 

By purchasing a new Komatsu hydraulic excavator (a best-in-class machine that can easily change from a bucket to a shear, thus boosting productivity), Crooks and his team were able to work smarter, rather than harder.

“Everything is made so easy, and I trust Paragon to get the job done.”

What are the Benefits of Construction Finance?

Pandemic or no pandemic, contractors and subcontractors have always had to put up with the uncertainties of the construction industry. 

It’s a relief, then, that construction finance mitigates many of the industry’s sharper edges – and that this finance is still available to support businesses operating during COVID-19.

Here are just a few of the ways that construction finance can benefit your team and projects:

✓ It frees up cash flow

This one’s a biggie. Cash flow is thought to be the main reason that the failure rate of the UK’s construction businesses is so high – and continues to soar. 

Businesses are going bust not because they can’t find work, or because they’re bad builders. They’re failing because they can’t afford to take on new work – because they simply don’t have the cash to spare. 

To demonstrate how important cash flow is in the lifecycle of a construction business, let’s take a look at two contrasting timelines. Only one of the businesses below uses construction finance. Which one do you want to be?

See what we mean?

Construction finance is so vital because it allows you to delay or spread out the significant outlay associated with buying new tools or equipment. You can pay your wages and suppliers without delay, and accept new jobs without stress.

Plus, with almost immediate funding available against your accounts receivable, you won’t have to brave those long, lonely waits for payment.

✓ Bad debt protection

If it’s not cash flow that’s killing the UK’s construction businesses, you can bet it’s bad debt. Your business might even have first hand experience of it – clients going bust when they owe you money for work, and ultimately being unable to pay.

It’s not fun – but there is a way around it.

As you’ll have seen above, many construction finance suppliers offer bad debt protection. It’s a premium, add-on service – and as such comes at an extra cost – but if your clients have a less-than-stellar credit history (or previous insolvencies to their names), it’ll definitely be worth the money.

Bad debt protection essentially absolves you of the liability you face for money owed to you by a client, should that client become insolvent. Instead, the construction finance company funding your invoices takes this on – meaning you won’t be out of pocket, even if your clients are.

✓ It’s a short-term option

Taking out a hefty loan from the bank often seems like a good idea at the time. But these debts can stretch on forever – gathering not dust but interest, and ultimately forcing your business into a whirlpool of debt.

Construction finance – particularly that which is tied to your invoices, and thus money already owed to you – helps you avoid that crippling cycle of debt. You’ll receive funding immediately, and – because most of the UK’s top invoice financing companies collect payment on the invoice for you – the debt’s over as soon as your client gets around to paying up. 

It’s a solution geared towards the short-term – to helping you get cash when you need it, without all the strings attached.

Next steps

We’ve said it before, and we’ll say it again. There’s no one size fits all construction finance solution for UK businesses.

Some contractors will require asset finance only – a small loan to purchase some new tools, or upgrade some tired equipment for a big job. On the other hand, some contractors will prefer an option that looks more like invoice finance – a quick cash injection to bridge those long waits for payments, and free up funds for immediate expenses, such as wage payments.

Other businesses will no doubt require a blend of the two construction finance options above – a more flexible, hybrid funding option that blends straightforward construction loans with ongoing, invoice-based finance.

Ultimately, the construction finance package that’s right for you will reflect the unique qualities and needs of the business you’ve built. We know this – and it’s why, when you decide to compare quotes with us, we take into account your own business’ specific needs and requirements.

So why not take advantage of our free quote-finding service? Here’s how it works:

1) First, provide us with some information about your requirements. We’ll ask:

• Whether you’ve used invoice finance before
• What industry you’re in (although, since you’re here, we already have a pretty good idea)
• How long you’ve been trading for
• What type of customers you have (are they mainly businesses, or individuals?)
• What your expected annual turnover is this year

2) Knowing all of the above allows us to match you with one or more construction finance providers that meet your needs. And no, that’s not any old supplier that takes our fancy. We pair you up only with companies that are the right fit for the requirements you’ve specified.

3) Newly armed with these details, one or more construction finance providers will be in touch with you directly, to offer tailored quotes – so keep your phone at hand. 

Hit one of the buttons below to start our questionnaire.

FAQs

What affects my business’ eligibility for construction finance?

Sadly, construction finance won’t be the right option for – or even accessible to – all businesses in the industry.

As is the case when you take out a business loan, construction finance providers will underwrite you, to ensure you’re not a credit risk. This involves assessing your:

• Credit score and history
• Number of debtors
• Turnover
• The total value of the invoices you’re seeking finance for
• The amount of time you’ve been in business

Because invoice-based finance is leveraged on how much you’re owed, lenders will typically also take the creditworthiness of your customers into account, too. After all, they’re the ones you (and ultimately, the lender) will be chasing for payment.

To be eligible for construction finance, you’ll also need a current CIS UTR number, and be the main contractor or subcontractor on the job.

How much does construction finance cost?

Typically, construction finance will involve the following fees:

• Service charge: a small percentage of your overall turnover
• Discount charge: the interest rate you’ll pay on what you borrow
• Annual fee: a small percentage of the finance facility limit

What you’ll pay for construction finance will always be tied to your eligibility criteria, and your business’ unique situation and requirements. This means that your full fee package will be affected by your business’ turnover, creditworthiness, and size – not to mention the value of your ledger.

Do I have to finance my entire sales ledger?

While this depends, to an extent, on the lender, most invoice factoring deals do require you to finance your entire ledger.

For a more flexible way of financing your next project or asset, you can try selective invoice finance – it’s essentially factoring, but with more choice over which invoices you’d like funding for. Selective invoice finance (also known as single invoice discounting) is usually a more expensive service.

Why can’t my construction business just get funding from the bank?

Often, the issue isn’t that banks aren’t willing to lend to you (though their strict underwriting processes mean that often they won’t). Rather, the problem with a bank loan is that banks typically aren’t willing to fork out for the full cost of the project at once. 

Banks usually only provide finance in stages as work progresses, or after it’s complete and has been re-mortgaged. When you need cash now – for vital materials, labour, and sub-contractors – staged payments just aren’t workable.

Plus, bank loans come with another caveat – that they’ll likely ask you to secure the loan with collateral. This could mean putting not only your business’ prized assets on the line, but risking your personal property, too.

When you select invoice finance, funds are typically available within 24 hours – mitigating the cash flow woes that come with bank loans. And, because the funding is only tied to money you’re already expecting, you won’t have to stump up any collateral, either.