Why We Fund Construction When a Lot of Lenders Won’t

No sector feels the gap between finishing the work and getting paid for it quite like construction. Wages, materials, plant hire and subcontractor invoices all fall due immediately. Payment for the job itself can be 30, 60 or 90 days away, longer still once retentions are factored in.

It is not a sign of a struggling business. It is simply how construction payment cycles work, and it catches out well-run, profitable contractors just as often as anyone else.

It is also the reason a lot of funders quietly avoid the sector altogether. We have gone the other way, and construction is now one of the areas we know best.

Why construction cashflow is different

Most sectors invoice on completion and wait a single, fixed payment term. Construction layers several delays on top of each other:

• Staged or interim payments tied to valuation certificates
• Main contractors passing their own payment delays down the chain to subcontractors
• Retentions, typically 2.5% to 5% of contract value, held until practical completion or the end of the defects liability period, sometimes 12 months later

Add the upfront cost of materials, labour and plant, all paid before an application can even be raised, and it is easy to see why construction is disproportionately exposed even when the work is profitable and the order book is full.

The figures bear it out. Construction has the worst insolvency record of any sector in the country: 3,827 insolvencies in England and Wales in the year to March 2026, around 16% of all company failures. In March 2026 alone, 347 construction businesses went under, and 193 of them were specialist contractors. As one insolvency practitioner put it, most were not struggling for lack of work. They were struggling for lack of cash.

Why most funders steer clear

Put yourself in a mainstream lender’s shoes. Construction does not look like other sectors:

• Payment runs on applications for payment and certificates, not straightforward invoices
• Sums can be reduced after the fact by contra-charges, variations or disputed valuations
• Retentions mean part of the money was never due on the invoice date anyway
• JCT and NEC contracts often carry clauses restricting assignment of payment
• And the sector tops the insolvency tables year after year

Faced with that, most funders take the easy decision and decline. It is not unreasonable. It just leaves a large number of perfectly good contractors with nowhere sensible to go.

Why we do it

Because none of those problems are actually unsolvable. They just require someone who understands the sector rather than someone applying a generic credit policy to it.

We read the contract before we agree anything, so assignment clauses turn up at the start rather than halfway through. We look at the covenant of the main contractor paying the bill, not just your own balance sheet. We know which parts of an application are fundable and say so plainly rather than discovering it later. And because we fund selected applications rather than your whole ledger, you use us on the jobs where the pressure actually sits.

What that adds up to is not really a funding line. It is certainty.

Our clients tell us the real value is not the money. It is knowing on Monday that Friday’s payroll is covered, whatever the main contractor does.

That is what construction businesses are most often missing. Not work, not skill, not margin. Just the confidence that they can meet their commitments on the day they fall due, without phoning a merchant to ask for another fortnight.

What that looks like in practice

A few typical situations, drawn from the kinds of businesses we fund:

• A groundworks contractor on a large residential scheme, 45 days between application and payment, releasing funds against each certified valuation so that twenty people are paid on time every week without the owner watching the bank balance.
• An M&E subcontractor whose main contractor slipped payment by three weeks in the middle of a fit-out. One funded application covered wages and materials, the job carried on, and nobody further down the chain was asked to wait.
• A scaffolding business that won a contract roughly twice the size of anything it had taken on before. The work was profitable. The problem was funding the labour and kit for two months before the first payment arrived.

In each case the business was sound and the customer was good for the money. The only thing missing was the cash arriving when it was needed rather than weeks later.

The alternative most contractors reach for

The instinctive answer to that gap is a short-term loan. Wages are weekly, plant hire is monthly and the merchant wants paying in thirty days, none of which waits for a valuation to be certified.

The trouble is that the next valuation is also late, or short, or contra-charged, so there is a second loan and then a third. This is loan stacking, and construction is where we see it at its worst, because the payment cycle guarantees the gap reopens every month. Each facility is usually secured against something real: the yard, the plant, or the director’s own home.

By the time a contractor in that position reaches us, the picture is familiar. A capable business, a full order book, several expensive facilities and every asset already charged. The options are far narrower than they were a year earlier.

A word on retentions and contract terms

It is worth being direct about the limits, because a contractor who has been let down before is right to be sceptical.

Retentions reduce the amount available to fund on a given application, since that portion is not due to be paid regardless. Some standard-form contracts, JCT and NEC-style agreements in particular, restrict assignment of payment, so terms need checking before anything goes ahead. We will always do that with you upfront rather than let you find out later.

Selective invoice finance closes the gap between raising an application and the money clearing your account. It is not a substitute for managing retentions or contract risk more broadly, and it is worth weighing against your other options rather than treating as a default.

Who this suits

• Subcontractors working staged or interim payment terms
• Main contractors managing their own supply chain’s cashflow pressure
• Specialist trades whose labour costs land weeks before the money does
• Businesses taking on larger or longer contracts than their current cash reserves comfortably support

Most contractors have never heard of it

Here is what actually prompted this piece. We regularly sit down with contractors who tell us, quite openly, that our conversation is the first time they have ever heard of invoice finance. Not that they looked at it once and ruled it out. They did not know it existed.

The national picture says the same thing. Of the 5.7 million SMEs in the UK, roughly 1% use any form of invoice finance, and around 58% have never explored a funding option beyond their main bank.

It is a strange position for a funder to be in. The businesses who would benefit most are not out looking for us, because nobody goes searching for something they have never heard of. When a valuation runs late, a contractor thinks about the overdraft, the bank, or a short-term loan, because those are the three things everybody knows about. Invoice finance does not come up, since nobody ever put it on the list.

So treat this as an introduction. Selective invoice finance lets you draw the value of work you have already done and certified, on the jobs where you need it, without taking on debt or signing your whole ledger away. It has existed for a very long time. It is simply one of the best kept secrets in business funding, and there is no good reason for that.

If you are running a solid construction business and losing time to the gap between doing the work and being paid for it, it is worth a conversation, even if only to find out what it would look like. We will tell you honestly whether we can help and how much you could release.