Client is in construction and the contractor is typical of the larger companies and knocks applications back and this makes cash-flow difficult at the best of times, but sub-contractor rates have been going throughthe roof of late which makes things difficult when on contracted prices.
The business is making reasonable profits but is just having a cash-flow squeeze. Are there any specialist lenders we can talk too who can bridge the gap between applications and certfiied payments? The client has ample equity for security if required, but would prefer not to employ that if possible.
Replies (5)
Please login or register to join the discussion.
Maybe Close Brothers but not really sure as described
I know Close are comfortable doing property development funding, however my experience of this has been more where the borrower owns the property and is seeking to develop it either to refinance on completion or repayment from end sale, and is looking for funding towards initial asset purchase and then staged drawdown through the development. Have heard Barclays are starting to fund similar though have had no dealings with them myself.
Your client appears to be more a sub contractor with his own sub contractors acting for A N Other contractor/developer, in effect he/she is more looking for working capital funding. Traditionally this would have been the bread and butter of the main high street lenders, these days not so sure. Of the banks I chatted with this year AIB said they wanted to expand their general business lending but property lending was out, Royal Bank have made similar sounds. As your client is presumably "associated" with the property development industry he could be tainted by association in the eyes of some of the banks; those of us who work in the property industry are still social outcasts vis a vis the banks; I no longer get invites to breakfast briefings etc.
Sorry I cannot help more, it is not an easy marketplace even after 6-7 years of downturn.
Yes ..
... that is what they are, more commercial fit-outs/re-fits than property development.
They could approach their bank but they will want belt and braces security, when they would rather give security on the WIP, it does come in just as ever the main-contractor under measures which screws cash-flow!
Is there a time lag between certification and actual payment
If a time gap between agreed certification / invoice and payment then invoice factoring might assist, however it never works out that cheap and can in the wrong hands play merry hell with the record keeping.
An idea, but probably a poor idea.
Bibby
@OGA - I used to look to raise finance for construction businesses a lot and its not an easy task.
Bibby do have a specialist construction division offering construction finance (aka factoring).
Your client will need to work for main contractors/clients who have a decent credit rating.
You mention the contractor certifying a lot less than the application figure - this isl likely to mean that the % prepayment offered will be low (less than 35% of application value) possibly even lower.
Also depends on what type of contract your client with contractor - if there are (potentially) damages payable on non performance then you'll struggle to get anything.
Typical process is that a specialist surveyor will audit your clients paperwork, send a report to Bibby who will then offer based on that report.
Your client will probably have to pay around £1k for the pleasure of being offered a pittance.
Only way I ever got it to work (with a decent prepayment %) was where there was a large time lag between the application being certified and the actual payment date. The certificates were then used for the draw down rather than applications - as the cert figures were pretty much always 100% paid the prepayment % was high - >75%.
That's the problem ...
... client puts in application for say £60k, contractor agrees and pays £40k, the rest will come eventually but doesn't help pay the subbies and suppliers who need paying now!