Construction firms increasingly turning to factoring

29/04/2013

New research has revealed that a growing number of construction firms across the UK are increasingly turning to factoring as a means of financing working capital and growth.

The research – which was carried out by corporate finance brokerage Embark Finance – found that an “unprecedented number” of contractors in the building trade services sector were making use of alternative means of financing such as factoring.

The alternative means of financing sees accounts receivable purchased by a factoring company, which then offers cost effective business funding. Mike Bailey and Richard Keenan, co-Directors of Embark Finance, which is based in the Midlands, told Credit Man that the key reason behind the growing interest in factoring is the demise of traditional lending from high street banks.

“The sad reality behind this trend in our view is that contractors are being moved on by their bank, the traditional funding source, which no longer wants this type of business on their books. Just as common, is the contractor looking to grow to take advantage of new business and income streams, but who has hit a brick wall when seeking to borrow money, as few lenders are keen to fund this type of contractual debt,” the co-directors added.

The firm added that factoring was not just being increasingly utilised by smaller firms, but also by leading organisations across the UK. “A high proportion of the latest deals up to £1.3 million of lending [were for] ‘sizeable’ players in the sector,” Mr Bailey and Mr Keenan went on to say.