JCT Contract Funding

The construction sector has traditionally been a challenging one when it comes to finance.

Your business can win a contract that means plenty of profit - but payment may not be forthcoming for months if work is priced in stages. In extreme cases, you may need to fund the work, with all labour and materials costs until the work is signed off and the building handed over.

Depending on the contract you have negotiated, you might need to wait months before you receive even an interim payment. A short contract could be complete before you receive the funds you need from your client.

It can put a serious strain on your cashflow, and may even mean that you have to turn down a lucrative project because you cannot afford to fund your work on it. 

Conventional funding solutions may not work.

As they can take months to complete a project, most contractors will raise interim, staged invoices (or applications for payment) before all the work is completed. The problem is that construction often involves numerous stages of work, and has the potential for the value of contracts to be reduced by damages for non-completion of future contracted works.

This led invoice financiers to fear that, in a failure or dispute, they might not be able to collect out the money advanced to the contractor from the client usually the building owner. This, coupled with long payment delays endemic to the construction industry, led to the sector being shunned by lenders. 

Fortunately, a number of providers are actively moving into financing construction companies and setting themselves up as specialists within the sector.  

Funding for JCT Contracts

The JCT work to produce these suites of standard forms for the various methods of procurement used for obtaining building work. They provide a familiar and proven structure for contractors - and having a JCT contract in place can now be used as the basis for the finance your construction business needs.

JCT Contract Finance acts to advance funds against your future billing - in effect using the value of your contract as the security for a loan.

The finance company can advance the funds you need to bring in materials and plant and crucially to pay staff - there’s no need to wait for your customers' payments. 

The lender will be paid when your client pays, and the balance, less their fees, will be paid to you.

So, you can take on ambitious new projects and be confident that your business will have the necessary cashflow. You can have the funds you need to deal with all your obligations, with no need for expensive funding from the bank or other providers.

How JCT Contract Funding works 

With JCT Contract Finance, the finance company will expect to see a detailed contract under one of the recognised JCT formats from a reputable end customer. They will want to ensure that your buyer will really be able to pay for the work once the contract has been completed.

This means that it is the credit rating of your end customer, rather than that of your own business, which will be central to securing the finance you need.

This advance is unlikely to be for the entire value of the contract, although some providers may provide a high percentage of the total value, particularly if you have multiple contracts that you are funding.

Normally the maximum prepayment level will be 70%, which is low - but can still provide a significant cash flow advantage, particularly where that level of prepayment will contribute towards paying the cost of workers and materials

Once your facility has been approved, accessing your money is straightforward:

1. Submit your contractual billing to your provider
2. They will release an agreed percentage of the value to you minus their fee
3. Once your customer makes a payment, the provider will release the remainder to you

Financial solutions from Rangewell

Contract Finance providers vary in the terms and costs of the finance they offer. Your business needs expert help to find the most competitive provider.

At Rangewell, we can use our finance expertise to support your business – and ensure that you have the financial solutions you need. We can help source providers who can provide JCT Contract Finance solutions that recognise the challenges you face and are tailored to your sector - reducing your costs, and increasing the levels of funding that you can call on. Whatever funding need you have for your construction business, we have you covered.

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