The number of construction companies using invoice finance has jumped by 17% in the last year, from 1,629 in 2011 to 1,911 in 2012, following a decline in traditional bank lending says a leading accountancy firm. Invoice financing allows businesses to borrow against unpaid invoices. This allows a business to recoup a significant proportion of the value of an invoice much faster, often on the same day as delivering the goods or service than the typical 60 or 90 day invoice time frame. Bank lending to construction businesses fell 17% in the two years to the end of July 2012 to £20 billion.
A leading accountancy firm commented “The construction industry has been badly hurt by the reluctance of banks to lend to even the most solvent businesses in this sector. New finance is the lifeblood of any business and without bank lending, construction firms are having to pursue alternative options”. “The clients of construction companies can be notoriously slow to pay their bills, so most construction companies need external financing when they start new projects”.
Over the past five years, the number of construction companies using invoice finance has grown by 65%. Recent research has found that in the second quarter of 2012, the construction sector received just 4% of loans made under the government’s Enterprise Finance Guarantee Scheme. Whilst the wholesale and retail sector received 28% of all EFG loans.