It’s tough to make a good living in construction, and particularly tough as a sub-contractor. You need to have a good enough supply of capital in order to pay suppliers and make payroll often before a contractor settles their account. And often you must buy supplies and make other payments months before you see any cash profit from the job. But with hard work, ingenuity and access to the best advice and resources, thousands make profitable companies in this sector. When times are tough, or when you simply need an extra injection to ease cashflow, there are alternatives to the traditional bank loan. Here are a few ideas for finance that doesn’t come from one of the big banks.

1. Construction Invoice Finance

Construction invoice finance or simply construction finance is, according to, one of the best alternatives to a bank loan. Construction finance is a way of allowing a construction company to borrow money against the value of its unpaid invoices. Construction finance provides a high level of working capital so a project can go ahead with materials purchased and payroll settled, before the invoice is settled. This specialist product is much easier to arrange than a bank loan, and also provides other significant advantages over a loan. It is, for example, easier to plan and budget as the payments are fixed and the financing terms are clear. It is suitable for profitable construction companies that may have already been turned down for a bank loan. And it is flexible, providing the right type of finance for every individual company.

2. Challenger Banks

Rather than targeting the traditional high street banks, construction sub-contractors can look to challenger banks that offer new products and services, and which work in areas where the main banks have moved away from. Challenger banks often offer better terms than high street banks, although they may also have a stringent acceptance policy for new debtors.

3. Spot Factoring Deals

Instead of entering into a long-term invoice factoring deal, a construction firm can arrange a spot financing deal where finance is provided against individual invoices. This is a good option for a particularly large deal, or when there is only a one-off need for working capital.

4. Development Finance

Individual projects can be financed through development finance initiatives, funded by independent financial providers. Loans are provided for a set amount and for a specific project, and can be repaid up to five years after the start of the project.

These alternative finance vehicles help fill a much-needed gap in finance for the construction industry, and the specialist products are more aptly tailored to this specific sector.

Image: Image courtesy of adamr /

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