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Construction Factoring


Construction factoring is always hard to obtain. Our client is a contractor in the construction industry. As construction contractors they faced the issue of paying wages weekly. However, their applications for payment were paid on 30 days at best and they often had to wait much longer.


Invoice factoring companies tend to avoid the construction industry as a whole. They feel that there are too many variables that can impact on what will actually be paid by a debtor. Typically the construction industry operates with ’applications for payment’ rather than traditional type invoices that invoice factoring companies are used to seeing. The amount that is actually paid is subject to the opinion of a Quantity Surveyor. In addition the amount paid can also be reduced by retentions and taxation deductions at source. In fairness the impact of these deductions can be measured fairly accurately and the factoring company can adjust the prepayment level to mitigate the risk.

Another major challenge is the fact the debt is usually contractual and there will typically be a liquidated damages clause. This causes real concerns for invoice factoring companies because in the event of the contractor’s business failing, debtors can apply the liquidated damages clause and not pay. This means that the invoice factoring company would not recover their funds.


In the whole of the UK factoring market there are 3 invoice factoring companies that truly specialise in helping businesses that operate in the construction industry. Our knowledge of the invoice factoring market allowed us to introduce a specialised construction factoring company that had a good understanding of the construction industry and its associated risks. As a result the construction factoring company were able to offer our client a factoring facility. This enabled our client to smooth their cashflow and pay wages without worrying if their applications for payment would be paid on time.

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